Workers, whether self-employed or employed by others, have the option of voluntarily delaying their retirement after reaching normal retirement age. This allows them to prolong their working career and obtain additional benefits in their future retirement pension. As of the entry into force in January 2022 of Law 21/2021, the purchasing power of pensions began to be guaranteed and the system strengthened. This law offers greater benefits for those who decide to delay their retirement, including a formula that combines a percentage increase in the pension with a fixed amount.
Last week, the Council of Ministers revealed a Royal Decree that establishes a new incentive for workers who opt for delayed retirement on a voluntary basis. So far, they have two options: receive a check in a single payment or a percentage increase in their pension. Although the impact of this change has not yet been quantified, the Government of Spain has highlighted that a higher activity rate is already observed among those over 60, which reflects an increase in the labor supply for this group.
In 2022, a new rule was implemented that has resulted in an increase in the number of delayed retirements, going from 5.4% to 7.8% in the first quarter of 2023. During this year, a total of 1,148 new pensioners have opted for single payment, receiving an average amount of 13,100 euros. This number of beneficiaries represents 17% of the pensions that have received a supplement for delay, which is an increase of 5% compared to the same period of the previous year.
Advantages of extending retirement according to Social Security
As of January 1, 2022, all those workers who decided to voluntarily delay their retirement had the option of choosing two options to receive an economic supplement to their pension. The first option is an additional percentage of 4% for each full year of contributions after reaching ordinary age, which will increase the amount of your pension. The second option is a fixed amount for each year of contributions, which varies between approximately 5,000 and 12,000 euros, depending on the years of contributions at the time of retirement, and is received at the time of retirement.
As of May 18, 2023, with the entry into force of Royal Decree 371/2023, a third option is added: a mixed formula that combines the two previous options. It should be noted that this option has no retroactive effect. If you decide to postpone retirement between two and ten years and you opt for the new formula, you will receive an increase from what you would receive if you chose the current single-payment formula. If you decide to delay your retirement for 11 years or more, you will receive a one-time payment applied to five years of the delay period and a 2% increase in your pension for each year you delay.
Workers who can access delayed retirement
It is important to note that delayed retirement is an option available to both self-employed workers and those employed by companies, as well as civil servants, the military, magistrates, former presidents, vice presidents, and ministers. If an individual decides to continue working after reaching age 66 and four months, he may receive a supplement to his pension in the form of monthly payments, a single payment, or a combination of both.
To determine if delayed retirement is the best option, applicants can use the Social Security retirement simulator to calculate their pension based on their work history and compare it with the regular pension. It is important to remember that it is necessary to choose one of the three available options at the right time. Otherwise, an additional percentage of 4% will automatically be applied to the pension for each year of contributions after the age of 66 years and 4 months.