The current trend in the pension system is for new retirees to retire with a larger pension than the average pension. , the average retirement pension was 1,254 euros for the average 1,364 euros per month of the new registrations, that is, the new retirees. A trend that also applies to people who retire early.
However, all pensioners should know that pensions are currently limited by a maximum amount that is regulated annually and that by 2022 has been set at 2,819.18 euros per month and 39,468.52 euros per year, according to Royal Decree 65 /2022, of January 25 that can be consulted.
All people who have contributed for higher contribution bases must take this circumstance into account. And especially if they retire early, since that modifies the conditions in which early retirement occurs. The reason: that their pension cuts may be different from those of other workers. This affects each worker in a different way, although the age at which they retire early also counts.
What happens if a person with high salaries (and therefore high contribution bases) retires early at age 63? This age is one year less than the actual retirement age, of just over 64, and at least two years less than the ordinary retirement age, so it is a special case but no less significant for that (, the The 63-year age bracket is the third most numerous of the new retirement registrations recorded up to June).
How the amount of the retirement pension is calculated
Workers who decide to retire early at age 63 have two options to do so: voluntarily if they have reached 37 years and six months (which leaves their ordinary retirement age at 65 and allows advances of up to two years ) or by the involuntary modality if it comes from an involuntary termination of work. Be that as it may, the method of calculating pensions remains the same.
This adds the contribution bases of the previous 25 years (300 months) and divides them by 350 to obtain the regulatory base, which can be used for periods without contributions. The percentage of the same to which the pensioner is entitled depends on the time quoted in his career: with 15 years, 15% is guaranteed and for each of the following 106 months an extra 0.21% is given, while 0.19% is granted for each of the following 146 months. With 36 years of contributions, you are entitled to 100% of the regulatory base.
What are the reduction coefficients of the pension
It is to this amount that the pension reduction coefficients that serve as compensation for early retirement must be applied. These pension coefficients have become monthly and applicable to the amount of the pension. They have also been redesigned in their reductions, so that for a person who retires early at age 63, and depending on the type of retirement, they can be the following:
Voluntary early retirement:
-In workers under 38 years and six months the reductions range from 21% to 5.87%.
-In workers between 38 years and six months and 41 years and six months with contributions, the reductions range from 19% to 5.60%.
-In workers between 41 years and six months and 44 years and six months with contributions, the reductions range from 17% to 5.33%.
-In workers over 44 years of age and six months of contributions, the reductions range from 13% to 5.07%.
Involuntary early retirement:
-In workers under 38 years of age and six months of contributions, the reductions range from 22.50% to 5.87%.
-In workers between 38 years and six months and 41 years and six months, the reductions range from 21% to 5.60%.
-In workers between 41 years and six months and 44 years and six months, the reductions range from 19.50% to 5.33%.
-In workers over 44 years and six months the reductions range from 18% to 5.07%.
What are the cuts to workers with high salaries
Once these pension reduction coefficients have been applied, it may be the case that the resulting amount is greater than the maximum amount of pensions. This will happen to pensioners who have had high salaries and contribution bases above that ceiling for many years. Be that as it may, these people will have to suffer cuts in their pensions from that maximum amount.
As explained by Social Security, the amount of the pensions of these workers “may not exceed the amount resulting from reducing the maximum pension limit by 0.50% for each quarter or fraction of a quarter in advance.” This, applied to workers who retire early at age 63, has the following consequences:
-Cuts of between 2% and 4% of the pension in voluntary early retirement, that is, between 56 and 112 euros: they leave pensions of between 2,765 and 2,707 euros per month approximately.
-Cuts of between 4% and 6% of the pension in involuntary early retirement, that is, between 112 and 169 euros: they leave pensions of between 2,707 and 2,650 euros per month approximately.
Women who receive the supplement to reduce the gender gap in pensions (from 28 to 112 euros per month depending on the number of children) have nuances in the application of the maximum amount of pensions, since these figures are not counted at eyes of that limit and therefore they will be able to exceed it due to the collection of the complement.
These will be the changes in early retirement from 2024
This situation of workers with high salaries and their access to early retirement will be modified from 2024, the year in which a progressive calendar will begin with which the cuts to pensions will be equalized with the rest of the citizens. In other words, of that 0.5% per quarter, the reduction coefficients of the ‘Escrivá reform’ will be applied to the maximum amount of pensions.
The measure, approved in the first leg of the reform of the Minister of Inclusion, Social Security and Migrations, will be progressively implemented from year to year until 2033, the date on which the application will be complete and final.
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