Since 2013, Social Security has offered three formulas with which benefits can be collected at the same time as wages
Despite the fact that the effective retirement age is still below 65, there are 298,300 workers in Spain who have already reached this age. In total they represent 1.5% of the active population. It is a record in which several causes converge. On the one hand, the gradual slowing down of the statutory retirement age and the equally gradual increase in the number of years of contributions needed to reach 100% of the pension.
On the other hand, the transition from salaried to retired means an average loss of 20% of income, forcing many to extend their working lives to add additional years of contributions and thus improve their economic situation once they retire. And finally, although Social Security claims it has no data to assess its effect, there are the different formulas that make it possible to reconcile the collection of pension benefits – in some cases full-time – and paid work.
The first option is offered by the so-called active retirement, which is open to employees of all social security systems (except government officials), regardless of whether they work full-time or part-time.
Although it applies to both employees and the self-employed, their economic conditions are different. While they work, the former receive 50% of the pension initially recognized, regardless of the length of the working day they perform. The self-employed, except when they are a business or part of a community property, can charge 50% or jump to 100% if they employ at least one employee. Initially, every contract was allowed, including domestic workers, but since 2018 it has been necessary for that person to carry out the same activity as the self-employed person. Under no circumstances may neither salaried persons nor self-employed persons, during the time they combine wages and pension, collect minimum supplements or the corresponding supplement for the delay of the retirement age.
To be eligible for this formula, you must be entitled to 100% of the statutory basis (of the pension), which in most cases equals 36 years of contributions for those who retire in 2022. But please note: you cannot apply for anything other than reaching the normal retirement age; In January, the conditions of access changed and it is now essential to continue working and contributing for at least 12 full months from that date.
Another innovation introduced this year releases the company from the obligation to maintain its employment during the period in which the employee remains in active retirement in his position. Your only obligation now is to pay for it. Both the employee and the company (or self-employed) pay for temporary incapacity for work and occupational accidents, premiums to which is added a ‘solidarity contribution’, which is not calculable for benefit purposes and amounts to 9% based on the common contingency contribution. The company pays 7% and the employee the other 2%.
The second option is partial retirement, which allows for both a shortening and an extension of working life. In other words, one of the options offered – the most well-known – is to advance penalty-free thanks to a repayment agreement and, on the other hand, to agree with the company to remain in the position after reaching retirement age.
Where there is a childcare agreement, the age at which partial retirement can be reached varies depending on our premium career, which must always be over 33 years. In 2022 you can submit an application from 63 years and four months or from 62 years and two months if you have 35 and a half years of premium. Exceptionally, manufacturing workers have access until January when they turn 61.
On the other hand, it is necessary to have a full-time contract and a seniority in the company of at least six years. The reduction of the working day in this case will be between 25% and 50% (67% in the manufacturing industry) compared to a full-time employee of the same company. It can be as high as 75%, or even 85%, if the principal’s contract is full-time and indefinite.
The amount of the pension received during that period is inversely proportional to the hours worked. That is, working 25% of the day is equivalent to receiving 75% of the pension and achieving half a day is equivalent to giving up 50% of the benefit. Over the term of the contract, the premium income will be equal to 95% of what would have been agreed had the contract continued to work full time.
In the manufacturing industry, upon retirement before the end of the year, the premium income of the partially retired person is reduced proportionally based on the reduction in the number of hours worked.
Conversely, if partial retirement is used to delay retirement – that is, without a replacement contract – one must be of legal age and have a minimum premium period of 15 years, two of which must have expired during the bottom 15. These employees have the choice between full-time or part-time work. In the latter case, they can reduce their schedule by 25% to 50%.
As with a reception agreement, the amount of pension received during that period is inversely proportional to the hours worked. As long as this situation continues, the company and employee will contribute 95% of the base that would correspond to full-time work. At the end of working life, Social Security calculates the contributions generated during that extra time in order to increase, if this entitlement has arisen, the amount of the old-age pension that already corresponded to it.
The third option is the so-called flexible retirement, which occurs when the retiree is already a full-fledged retiree and decides to go back to work, either in the company where he previously worked or in another company. In this case, the new contract must be part-time and in paid employment, even if it was previously self-employed.
The working day must be between 50% and 75% of what is usual in the company and the same percentage is deducted from the pension for the duration of the contract. So if you work half a day, half will also be deducted from the normal pension amount (which you received before you went back to work).
During that period, you will be quoted in the same way as any other employee. Also in this case, when you return to retirement status, the premiums generated in that extra time will be recalculated to increase the pension amount before you are reinstated.
With a few exceptions, such as professors, magistrates, judges, prosecutors and lawyers of the Administration of Justice, anyone who meets the requirements to retire and wishes to defer access to retirement can continue to work under the same conditions that they already exercising. It is the so-called deferred voluntary retirement, an option that, for each additional year worked, gives beneficiaries a bonus equal to 4% of the pension that would have been awarded to them had they retired once they reached legal age. Today, with an average old-age pension of EUR 1,255 per month, this means adding EUR 50.2 to each of the 14 benefits for each year of continued activity.
There is also the option to obtain a more immediate reward and choose the subscription in one go at the time of retirement between 5,000 and 12,000 euros (depending on the additional years of premium) or opt for a combination of both payments.
In addition to the formulas that combine the old-age pension with a paid job, you can also be a fully-fledged pensioner – ie enjoy the full benefit – and receive income from exercising a professional activity.
The condition is that it is self-employed, that the income during the year does not exceed the Minimum Interprofessional Salary in annual calculation – set at 14,000 euros this year – and that it is taxed on it.
Since 2019, those who, after the date of recognition of the retirement pension, engage in any activity of artistic creation for which they receive income from intellectual property rights, fall outside this limit of the SMI. In any case, retirees who opt for this formula do not have to contribute, but neither do they generate new entitlements to the benefits they already receive.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
