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Experts Warn Spain’s Pension System Needs Overhaul as Early Retirement Penalties Bite

Demographic pressures from an aging population coupled with low birth rates have prompted calls for reforms to raise the retirement age, with early retirement rules also under scrutiny.

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Andrés Millán.

Overview

  • Economist Gonzalo Bernardos cautions that Spain’s public pension model is unsustainable over the next two decades without substantial policy changes.
  • Spain’s statutory retirement age will increase to 66.5 years in 2025 and is set to reach 67 by 2027 amid debate over further hikes.
  • Opting to retire up to 24 months early triggers permanent pension reductions via monthly coefficients, with cuts ranging from 21% for under-38.5 years of contributions to 13% for those with over 44.5 years.
  • Labor lawyer Andrés Millán recommends delaying early retirement to 19–20 months to reduce penalties and selecting a retirement month between July and December to capitalize on higher CPI revaluation.
  • Advisers urge using the Social Security’s retirement simulator and consulting experts to calculate estimated benefits and avoid unexpected pension shortfalls.