The complete guide to early retirement: requirements and considerations
Patrick2023-12-29T16:39:26+00:00Your employees can access their retirement pension before reaching the ordinary legal retirement age if they meet certain requirements and apply reduction coefficients in the calculation of their pension.
The requirements for accessing early retirement depend mainly on whether or not the access is voluntary for the worker. See how it works.
Involuntary early retirement
External causes
Reasons.
A worker may be eligible for early retirement if the termination of his or her contract is for reasons beyond his or her control. This occurs if the termination takes place for any of the following reasons:
- By collective dismissal for economic, technical, organisational or production causes (also known as ETOP causes).
- By dismissal for objective causes (known or supervening ineptitude; lack of adaptation of the worker to the technical modifications in his/her job; concurrence of an individual dismissal for any of the causes foreseen for collective dismissal, or budgetary insufficiency for the maintenance of the contract in the case of contracts for an indefinite period arranged by non-profit entities for certain public plans and programmes).
- Due to death, retirement or incapacity of the natural person employer or due to the extinction of the legal personality of the SL.
- By judicial resolution once insolvency proceedings have been declared.
- Due to force majeure ascertained by the Labour Authority.
- By termination of the contract at the will of the worker due to causes derived from geographical mobility, substantial modification of working conditions or serious breach by the employer.
- Termination of the contract at the employee’s will due to being a victim of gender violence.
In cases of collective dismissal and individual objective dismissal, the worker must prove that he/she has received the compensation derived from the termination of the contract (providing proof of the bank transfer received or equivalent documentation) or, failing this, that a legal action has been filed to claim said compensation or to contest the dismissal.
Age.
In these cases, you may retire at a lower age by four years (maximum) [LGSS, DS 7] compared to the legal retirement ages indicated in the table provided (which details the gradual application of the retirement age and years of contribution). Therefore, in 2023:
- If he/she accredits 38 years and 6 months or more of contributions, the worker will have to be at least 61 years old.
- If only 33 years of contributions are credited, the worker must have reached 63 years of age.
Note that there are other age bonuses for arduous work or disability.
The amount of the pension does not have to be higher than the minimum pension, unlike in the case of voluntary early retirement.
Other requirements.
However, in order to take early retirement due to involuntary termination, the worker must also meet the following requirements:
- Have contributed for at least 33 years. In this case, one year of compulsory military service may be counted as having been paid if the corresponding certificate is available.
- Be registered as a jobseeker for at least 6 months prior to the date of application.
Reduction coefficients
Depending on the contribution.
If a worker takes this type of early retirement, his or her pension will be reduced by applying coefficients for each month or fraction thereof remaining before reaching the legal retirement age, depending on the accredited contribution period (see the table below to find out what these reduction coefficients are).
Example.
In December 2023, your company is going to make an objective dismissal of an employee who has just reached the age of 61 and who has paid contributions for 36 years. To this period must be added the “theoretical” contribution that will occur from the date of dismissal onwards until he retires. The following aspects must therefore be taken into account:
- Legal retirement age.If the worker is currently 61 years old, in December 2027 he would be 65 years old and would have contributed 40 years (if we take as “theoretical” contributions those for the period from 2023 to 2027). Since at least 38 years and 6 months are required in 2026 to be able to retire at 65, he would meet this requirement and his ordinary legal retirement age would be reached in December 2027.
- Early retirement age: As this is an involuntary termination of employment, the person concerned could retire four years before the legal retirement age (i.e. at 61).
- If the resulting regulatory base was 3,000 euros, a reduction coefficient of 30% would be applied, since he is 48 months early and has less than 38 years and 6 months of contributory service, resulting in a pension of 2,100 euros.
Taking the data in the example, your company could delay the dismissal of the worker to a later date in order to reduce the reduction coefficients applied to the pension.
Voluntary early retirement
Requirements
Age and contributions.
If the employee wants to leave work voluntarily in order to take early retirement, he/she can also do so. In this case:
He or she must be no more than two years younger than the statutory retirement age. In other words, in 2023 you must be at least 64 years and 8 months old if you have only 35 years of contributions (the minimum contribution period is 35 years).
You can also take early retirement at 63 if you can prove that you have contributed 38 years and 3 months or more.
The amount of the pension must be higher than the amount of the minimum pension that would correspond to the person’s family situation at the time of reaching ordinary retirement age (in 2023 the minimum retirement pension is between 692.50 and 1,449.30 euros per month).
Coefficients.
If a worker takes this type of early retirement, his or her pension will also be reduced by applying coefficients for each month or fraction of a quarter before reaching the legal retirement age, depending on the accredited contribution period (we provide a table with these reduction coefficients).
Example of voluntary early retirement
Maximum bases.
One of your employees, who has always paid contributions on the maximum bases and who will be 63 years old on 31 December 2023, wants to know if he can retire and what pension he would receive, bearing in mind that on 1 December 2023 he has paid contributions for 34 years. This is the case:
- The worker will meet the age requirements for ordinary retirement in 2027. His ordinary legal age would be reached on 30 September 2027 at the age of 66 years and 10 months (if we take as “theoretical” contributions those of the period from 2023 to 2027).
- In your case, on 31 December 2023 you will not be eligible for voluntary early retirement at 63, as you would only have contributed 34 years and 1 month at that date, which is less than the legal minimum of 35 years.
- Therefore, he will not be able to take voluntary early retirement until 30 September 2025, when he will meet the requirement of having contributed 35 years and having two years less than his legal retirement age (64 years and 10 months).