Social Security reactivates its meetings with social agents this month to implement a pending reform. The Government has worked in recent years under the philosophy of increasing the average retirement age by giving more flexibility to the collection of salary and pension or penalizing early departures. The flexible retirementthe modality that allows the pensioner to return to work part-time hired by a company, comes into play now. In line with the actions of the cabinet of Minister Elma Saiz and, previously, of José Luis Escrivá, the reform that will begin at the end of January will give flexibility to this modality to encourage those who are already retired to resume the activity.
If something defines the general law of Social Security, it is its rigidity in choosing when and how to retire. This point was the first thing that the current governor of the Bank of Spain perceived when he accessed the pension portfolio. In a context of intense aging, Spanish regulations offer by default the incompatibility of collecting salary for professional activity with the entire pension.
To remedy this problem, Escrivá began to expand the range. Previously, delayed retirement only worked among the self-employed with dependent workers, as they could receive the full pension along with the income from their activity. In recent years they have penalized early departures and have introduced economic incentives to facilitate and encourage work beyond retirement age. They seek to ensure that employees delay their retirement beyond the age of 65 or 67, an effect that is barely noticeable.
Along these lines, flexible retirement is a modality that has been pending reform since the previous legislature. This ‘unknown’ option allows any retirement pensioner resume the activity as an employee working between 50% and 75% of the dayas long as you prove a minimum of 33 years of contributions. In exchange, it offers a proportional part of the benefit: between 25% and 50%. A priori, It seems unthinkable for a retiree to voluntarily return to work, which is why they play with financial rewards and the facilities. The Government could facilitate access by eliminating the requirement for full contributions, as has happened in active retirement.
What the experts propose
A recent publication by the Foundation for Applied Economic Studies (Fedea), which was published two years ago, reviews the Spanish pension system in a context of unstoppable aging that results in the need to facilitate the transition between work and the pension with a longer and more flexible work period, trying to alleviate the increase in the dependency ratio (number of pensions compared to the active population that supports them).
The article, signed by two eminences in the field –José Ignacio Conde-Ruiz and Jesús Lahera Forteza– opens the door to a labor revolution, with new contractual formulas, ways of contributing and conditions to retire flexibly. All of this, starting from the base: restructure article 213 of the General Social Security Law to make the collection of the full pension compatible with employed or self-employed work without income limits.
The authors believe that flexible retirement “must stop being configured as partial retirement with a reduction in the pension”, that is, expanding the possibility of collecting the entire pension to “return to the labor market without financial penalty.” In this way, they assure that returning to self-employment would be more attractive for a retiree.
Professors at the Complutense University of Madrid propose a change in the law to create a fully compatible employment contract between work and pension with an important detail in dismissals or terminations. “The employment contract of the active or flexible retiree, who already has the security of his public pension, should have a special legal regime, especially extinctive, without compensation costs for the contracting company,” the authors explain.
They point out that this regulatory change “would be subject to special regulation, always respecting non-discrimination by age (Law 15/2022)”. For its part, “the absence of withdrawal compensation does not violate this principle because the retiree has a insured public income in the form of a pension,” the experts indicate in the document.
Regarding the contribution of retirees who return to employment, companies and workers who come from retirement should pay a solidarity fee, similar to that paid by self-employed workers in active retirement. “The final objective is for the pension system to allow all the necessary flexibility so that the worker can adapt his exit from the labor market to his preferences,” the experts summarize in their proposal prior to the umpteenth upcoming Social Security reform.
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