State run Spanish Social Security suffered several reductions over its 60 years of existence but still some further deep adjustments are required. Compared with other European neighbours, benefits are generous. Based on “pay-as-you-go”, current contributions are below benefits in payment.
All workers and self-employed, must join the Social Security system. In 2027, normal retirement age will be 67, and 37 years of contributions will be required to attract the full retirement benefit.
There are incentives for late retirement with low impact in practice.
The present Government tries to revert a reform approved in 2011 and 2013, reintroducing the automatic update of benefits with inflation (eliminated in 2013) and suppressing the use of a “sustainability ratio” intended to reduce new benefits recognized from 2019 onwards. This ratio combined a mix of improvements in population’s longevity and evolution of GDP.
Only a small proportion of the working population is covered by an occupational pension plan. Most of these plans are DC, and the small amount accumulated at retirement is paid as a lump sum.