Government provides incentives to postpone retirement beyond the age of 65.

Jacobo Atienza, the head of the traumatology department at Gregorio Marañon Hospital in Madrid, recently turned 65, but he has yet to hang up his white coat. Like a growing number of Spanish workers - principally in highly specialised careers - he has decided to stay on beyond retirement age in order to continue to put his decades of experience to good use.

"I'm entitled to the maximum pension, which would be half of what I make now, but I haven't done it because of that," Atienza says.

However, since the start of the year Spanish workers do have a new financial incentive to continue working beyond the age of 65. Under a reform of the Social Security system that went into effect on January 1, workers will receive a 2-percent increase in monthly pension payments for every year they keep on working after reaching retirement age. The increase amounts to 3 percent if they already have 40 years of employment under their belts.

As a result, someone who retires at 66 and who would normally be entitled to the average pension (currently EUR 766.52 a month) would receive an additional EUR 15, or EUR 23 if they had worked for more than 40 years. The bonus increases without limit for every additional year of work, meaning that someone who stayed in their job until the age of 70 would receive EUR 850 a month, or EUR 900 if they had put in 40 years.

One important feature of the legislation is that there is no cap on how much someone will receive once they do decide to retire, largely because it is expected that those who continue working will mostly be professionals already entitled to the largest pensions. In that way, someone entitled to the maximum pension (currently EUR 2,384 a month) could substantially increase their retirement income.

Indeed, maintaining current income levels - together with the fear of being bored and unoccupied - is one of the principal reasons why workers seek to stay on beyond retirement age. For example, Joaquín Leguina, a Socialist congressman who will leave the chamber this year at the age of 66, has applied to return to his former job as a demographer at the National Statistics Institute (INE). "I still need a certain rhythm of work," says the former premier of the Madrid region. However, neither does he foresee himself ending his days at the INE - or in retirement. "After a while I'll find something else," he says.

But whether people keep working for professional or financial reasons, it is an inescapable fact that their continuing contribution to the labour market and to the Social Security system serves another purpose. With Spaniards' living longer, the burden on the welfare state is increasing, and will undoubtedly require more resources over the coming years. The EU estimates that by 2050 there will be 66 people retired in Spain for every 100 working.

The government's goal is therefore to ensure that people keep working as long as possible, and its first target is to take the age at which most people retire (currently 63.5 years) closer to the legal retirement age of 65. In addition to offering incentives to workers to stay on, the administration is also eager to change a business culture that has favoured shedding staff as soon as they near retirement age, often through early retirement programs that are harmful not just for workers, but also for the Social Security system.

January 2008

[Copyright EL PAÍS / LUCÍA ABELLÁN 2008]

Subject: Spanish news