A new law, which will allow the collection of a pension in Spain whilst continuing to work, is pending enforcement.
A benefit previously only endorsed to those who are self-employed with at least one employee in their business, new legislation aims to be more inclusive. By making pensions compatible with paid employment, the government aims to relieve the financial pressures of living solely on a pension, for the grand majority of the working population.
Proposing a fairer pension system for all
According to a proposal for a royal decree by the Ministry of Social Security, sent out to interested government parties, all workers will consequently have a right to receive a full pension whilst also working. The plan is for the percentage of the pension paid to rise yearly over a period of five years after an individual reaches the legal retirement age of 70, culminating in a full pension being received after the fifth year.
To put this into perspective, if a person aged 70 years seeks to continue working, once the new law is approved and enforced, they would initially earn 45-50% of their pension during the first twelve months – 50% being applied to those who continue to work whilst self-employed – rising to 65% after 3 years and then to 80% after the fourth year.
Whilst the majority of workers will find this hugely beneficial, the self-employed with own employees on the payroll will see a significant reduction in funds, as their pension from the first year will drop from the current rate of 100% down to 75%.
Referred to as the Active Retirement System, the government is liaising with trade unions and employee support organisations, with the aim of agreeing on a system which is fairer to all workers across Spain.
Pension in cases of partial retirement
New measures will also be taken to restrict partial retirement for those working in the manufacturing industry, meaning that no longer will they be permitted to semi-retire 4 years previous to the legal age (which in some instances was 61). This system will be reduced to 3 years, as long as there is employee cover for the time that is not worked by the partially retired individual, and will remain an option after 33 years of contributions have been made, and not the previously proposed 38,5 years.
Unions are still fighting to give workers in other sectors this same right, who currently are only permitted to partial retirement after 36.6 years of contributions. This will be reduced to 33 years and partial retirement will become an option up to 2 years previous to the legal age, again, only when employee cover is provided under reasonable working conditions.
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