The Spanish government is pursuing a set of policies designed to encourage longer working lives. Many workers are choosing to stay in the labor market beyond traditional retirement ages, and the country is offering compelling incentives to extend careers by as much as a decade.
Recent announcements indicate that Social Security will allow the blending of these incentives. In the 2021 pension reform, a further 4% increase to the pension or a fixed lump sum was introduced. Although only one option could be selected for a period, a new Royal Decree is now expected to permit combining both options in the final Council of Ministers discussion.
work after age 65
This proposal sits at the core of the government’s 2021 pension reform plan, which aims to push retirement further into the future. The clearest benefit is the postponement of retirement itself. Extending work life by ten years can lead to a roughly 20% boost to the corresponding pension benefit.
These government decisions are intended to bring the actual retirement age closer to the legal threshold, currently set at 66 years and four months. Spain remains among European nations with the lowest labor-force participation among those over 65. Only about 5% of Spaniards choose to extend their careers, a level roughly half the European average. The state is weighing reforms to secure stronger public pensions and ensure adequate funding for future generations by encouraging aging workers to remain active longer.
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Data indicate that the policy direction is having an impact. In 2022, a portion of new pensions were delayed, and in the first quarter of the current year the trend continued, with a notable rise. About half of postponed pensions extend by one year beyond the standard age, while roughly one quarter extend by more than three years.
mixed formula
The blended approach adds incentives for new retirees. Those who delay retirement by 2 to 10 years receive a 2% increase for each delayed year and a lump sum equal to half the period if they chose a single payment. If retirement is postponed for 11 years or more, a lump sum for five years of the delay is awarded, plus a 2% increase for each additional year worked.
Effective retirement age
According to Social Security Minister José Luis Escrivá, the effective retirement age has risen to 64.8 from about 63 in previous years. These figures suggest that measures encouraging later retirement are showing some effect. This year, 1,148 pensions were taken as a single payment, with an average amount around 13,100 euros. Those benefitting from the late-supplement option account for about 17% of late-retirement pensions, compared with 12% in the prior year.