Home Finance Retirement A guide to the Spanish pension system
Last update on May 07, 2020
Gary Buswell Written by Gary Buswell

Pensions in Spain are generous and foreigners working in Spain will get a Spanish pension if they meet certain conditions.

There is a mandatory Spanish pension system that is funded by contributions to its social security system.

Foreign residents who work in Spain can claim a Spanish pension providing they meet certain criteria. In some cases you can transfer international pensions to count towards your pension in Spain.

This guide to pensions in Spain includes sections on:

The Spanish pension system

Spain operates a three-pillar pension system which consists of:

  • The Spanish state pension (first pillar) funded through compulsory contributions and available to all residents working in Spain; it also covers survivors’ pensions.
  • Company and employee pensions (second pillar) where conditions and availability depend on the employer.
  • Private pensions (third pillar) which are voluntary and typically have more flexible conditions than the state Spanish pension. For example, some allow you to withdraw your savings before the Spanish pension age.

The state pension in Spain (first pillar) covers two categories under which people can claim benefits. These are:

  • a contributory pension based on employment and social security contributions in Spain;
  • a non-contributory pension to ensure basic economic provision for residents who don’t qualify for other pension support. This is mainly for low-income households and those with disabilities

The Spanish Ministry of Inclusion, Security and Migration (Ministerio de Inclusion, Seguridad Social y Migraciones) oversees the state pension in Spain. The government spends around 11.4% of GDP on pensions, above the global OECD average of 8.2%.

Although pension rates in Spain are generous, government reforms in recent years have aimed to reduce reliance on the state pension and boost the second and third pillars of the Spanish pension system. These include increasing the state pension age and tightening up the requirements for early retirement.

However, some experts have said that reforms haven’t done enough to encourage more investment in the second and third pillars.

Who is eligible for pensions in Spain?

Pension age in Spain

Reforms in 2013 set to raise the state pension age in Spain from 65 to 67 by 2027. The retirement age increased at the rate of one month per year until 2018. Thereafter it increases by two months a year. As of 2020, it stands at 65 years and 10 months.

However, it is still possible to retire at 65 years if you have paid 37 years of social security contributions. This will rise to 38.5 years by 2027.

pensions in spain

Voluntary early retirement has been restricted in Spain. You can retire two years early if you meet certain conditions and have made at least 35 years of contributions.

Additionally, there are some special cases – for example disabled workers or those in hazardous jobs such as fire-fighters – where you can claim a full Spanish pension from the age of 60 (or as early as 52 in some situations) if you have made sufficient contributions.

Partial retirement and flexible retirement are also available as early retirement options in Spain.

Who can claim a state pension in Spain?

To qualify for the minimum state pension, you must have worked and paid Spanish social security contributions for at least 15 years. Additionally, at least two of these years must be within the 15 year period immediately preceding the pension claim.

There are some exceptions that can count towards your contribution period, for example maternity leave, unemployment or certain workplace hazards.

In order to claim a full Spanish pension rate, however, you must have worked and contributed for at least 36 years. This will rise to 37 years by 2027.

Self-employed workers can claim a Spanish pension, providing they have registered and paid social security contributions into the self-employed social security fund.

What happens if you are not eligible for a full pension?

Those not eligible for a full Spanish pension can claim a state pension in Spain at a reduced rate. This is as long as they have made the minimum contributions.

If you haven’t made sufficient contributions due to low income, you may be able to claim the non-contributory pension in Spain if you meet the requirements. See the below section for more information.

If you haven’t made sufficient contributions due to not having been living and working in Spain for a long enough period, you won’t be able to claim any state pension in Spain.

EU/EFTA citizens and those from countries with pension agreements with Spain will be able to transfer contributions made in their home countries to count towards their Spanish pension eligibility. Others will have to rely on private pensions, occupational pensions or personal savings.

Pensions in Spain for expats

If you have moved to Spain from another EU/EFTA country, your insurance contributions in other EU member states can count towards calculating your eligibility for a Spanish pension.

For example, if you only worked in Spain for 10 years but previously worked in the Netherlands for 20 years, you can qualify for a pro-rata Spanish pension as well as a pro-rata Dutch pension. For example, you will receive a reduced pension rate only for the years you worked.

You will start receiving these pensions once you reach the legal pension age in each country. This means the amount you receive may vary if these pension ages are different. The country where you are living is responsible for processing your claim and bringing together your records from all the countries you have worked in. So if you’re an EU expat living in Spain, the Spanish government will administrate your state pension.

Spain also has bilateral social security agreements with a number of non-EU countries. These provide varying conditions for transferring pension and social security benefits depending on the country.

Transferring your pension to Spain

You may also be able to transfer private pension earnings without incurring charges through an overseas pension scheme. For UK pensioners in Spain, this is possible through a Qualifying Recognised Overseas Pension Scheme (QROPS) commonly used by UK citizens who move abroad with private pension funds.

In some cases, there may be Spanish tax allowances for pensioners to attract them to withdraw an annuity pension (anualidad) over lump sum payouts (suma global) or other pension options.

If you are moving to Spain and have a private pension in your home country, seek advice from your pensions provider or a financial expert
such as AES to discuss what your options are and how best to plan your retirement funds.

Spanish pension rates and contributions

Despite recent reforms, the earnings-related contributory Spanish pension rates remain among the highest in Europe. Pre-tax pension rates for a full pension in Spain are over 81% of gross annual salary. This is the highest among EU countries.

Spanish pensions are funded by contributions from employees at around 4.7% of their salary. Employers contribute 23.6% of an employee’s salary. Self-employed workers are responsible for paying all of their contributions, meaning that they personally pay more towards their Spanish pension.

pensions in spain

Spanish pension rates are calculated on how much you earn and how many years you worked and made contributions in Spain. If you work the minimum 15 years requirement, you will get at least 50% of the maximum payout. This rises in percentage for each additional year worked, reaching a maximum 100% for those who worked 36 years (rising to 37 years by 2027).

Spain has a minimum and maximum amount on its state pension. The maximum amount in 2019 was €2617.53. The minimum was €642.90 for those with a working spouse and €835.80 for those with a dependent spouse. There are 14 payments a year.

Average state pensions in Spain are €1205 for men and €750 for women.

Recent pension reforms also mean that the Spanish pension system is no longer directly linked to inflation. Benefits are also linked to ‘sustainability factors’, such as life expectancy, number of pensioners, and economic environment.

You can calculate your Spanish pension rates on the government social security website. Alternatively, you can use an online pension calculator.

Taxes on pensions in Spain

Pensions in Spain are taxed at progressive rates between 8-40%. Contributions made towards Spanish pensions are tax-deductible.

Tax benefits are also available through private third-pillar pension plans known as Ahorro 5. These allow savings up to €5,000 that can be claimed after five years onward; there is a guarantee of 85% and no taxes before five years.

Pensioners over 65 who sell property assets in Spain can access another tax incentive. Gains are taxed for real estate sales up to €240,000 a year if an annuity pension plan is taken out.

Supplementary pensions in Spain

Although the state has tried to incentivize occupational and private pensions in recent years, they are still not as well developed as in many other countries. Coverage levels are around 54% of the working population, but contribution rates from those participating are low.

Occupational pensions are mostly available through larger and international companies, with only around 7% of Spanish employers offering plans at present. Although traditionally financed by the employer, these are becoming more contributions-based with employees contributing between 20-35%.

Employer contributions to occupational pension plans are capped at around €8,000 per year. Annual contributions by both employer and employee are tax-deductible up to a limit of €8,000.

Retirees can choose between three payment options: annuities, lump sums, or a combination of both.

Other options are private pensions in Spain via a pension fund or direct insurance, which enable participants to make individual contributions at an agreed rate. You can access these through financial institutions such as banks and insurance companies.

Spanish tax legislation on private pensions allows tax-free annual contributions up to €10,000 or 30% of your salary (whichever is lower). If you are over 50, this rises to €12,000 or 50% of salary. Residents in Spain can claim this tax exemption on their annual tax return.

Non-contributory pensions in Spain

Those who are not eligible for the contribution-based Spanish pension and who do not have sufficient income can get a basic pension in Spain via the Compulsory Old Age and Disability Insurance – or Seguro Obligatorio de Vejez e Invalidez (SOVI) – which is not dependent on a contributory system but based on need.

This is a means-tested pension available to all Spanish citizens aged over 65, or 60 in the case of disabilities, earning below a threshold (€5,164.60 per year in 2018). Foreign residents can claim a non-contributory pension if they have lived in Spain for at least 10 of the last 15 years (including the two years prior to making a claim) and meet all other requirements.

pensions in spain

Your pension rate will depend on your income and number of dependents, but it will be between 25-100% of the threshold amount. The current maximum amount is just over €430 a month if you are not drawing any other pension and have no other regular sources of income.

Because this is a means-tested pension, non work-related finances such as savings and partner income are also considered when assessing eligibility. Claims are handled by each Regional pension authorities handle claims.

You can find out where to make an application here.

Other pensions in Spain

Survivor’s pension

In the event of someone passing away, a survivor’s pension can be paid to a surviving spouse or children under the Spanish pension system. This is providing the deceased made the minimum 15 years of social security contributions. The spouse remains eligible as long as he/she has not remarried.

The widow or widower’s pension is calculated according to various factors including employment status of the deceased at time of death, cause of death, spouse income, and whether there are dependents. The amount will be between 52-70% of the deceased’s pension entitlement.

Surviving children aged under 21 (or those with disabilities over that age) are entitled to an orphan’s pension if they lose a parent. This is calculated at 20% of the deceased’s pension entitlement, or up to 70% if the child loses both parents. This entitlement ends if the child is adopted or marries.

Disability pension

There are four types of state disability pension available in Spain:

  • Partial permanent disablement – when the disability reduces the worker’s ability to carry out normal work by at least 33%. This results in a lump sum payment equal to 24 months of the base pension rate.
  • Total and permanent disability – when the worker can no longer perform their job due to a disability, but may still be able to do other work. The pension is paid at the rate of between 55-75% of full pension amount.
  • Complete permanent disability – when the worker’s disability stops them from performing any job, 100% of the pension rate is paid.
  • Serious invalidity – when the worker can no longer perform any job and requires care or assistance to carry out daily functions due to the nature of their disability, 100% of the pension rate is paid. An additional supplement is also paid to help cover care costs.

Both survivor and disability pensions are also available as non-contributory pensions through SOVI at a lower rate for those not eligible for the contributory benefits.

Applying for your pension in Spain

To apply for a Spanish pension, you must visit your local INSS to submit a pension application form and necessary documents within three months before or after your last day of work.

Once this has been completed, the INSS will process the application. Pension payments will be typically backdated to your last working day up to a maximum of three months. You can access application forms on the government pensions website.

You will need to provide the following along with your application:

  • proof of ID, e.g., passport;
  • valid Spanish ID number;
  • if claiming a special pension or an early retirement pension, proof that you meet the eligibility requirements for this pension

If at any point your financial or family situation changes – for example if you remarry – you need to report such changes to the local authority that handles your Spanish pension. Financial and family variations can affect your pension rate in Spain, and you may receive undue benefits which will typically have to be paid back.

Pension advice in Spain

Because of the various different pension options available in Spain, it makes sense to seek professional advice before planning your Spanish retirement income.

Useful resources