Moving to Spain has become one of the most popular British past times over recent years. Whilst it is true that most people do not stay there for the rest of their lives, what about those of you that do? How are you going to cope once you are no longer earning money? How much do you know about the Spanish pension system and what you are entitled to? Do you know anything at all? Is it as much of a mystery as Flamenco? Well don't worry; here is some basic information to get you started.
The social security system in Spain pays state pensions, generally from aged 65 onwards. The amount paid depends on contributions made over the 15 years previous to retirement, as well as on the total number of years of contributions (up to a maximum of 35 years). The maximum state pension is approximately 32,000 Euros per year.
Contributions are defined percentages of salary (up to a maximum salary of approximately 32,000 Euros), but self-employed people choose how much they wish to pay between a minimum of approximately 250 Euros per month, and a maximum of approximately 900 Euros per month. The pension they subsequently receive is related to the amount they have chosen to pay.
Expectations are that state pensions will be reduced in future years, given the increasing burden on the social security system as the population grows.
There is a well-developed private pension plan system in Spain, operated by insurance companies and banks. Contributions made to pension plans are tax-deductible (up to a maximum of 10,000 Euros per year), and there is a wide choice of plans available. Generally speaking financial advisers suggest investing in potentially high-profit plans in the early years of contributions, switching to safer plans as retirement approaches. It is very easy to change from one pension plan to another, and to switch the investment from one insurance company (or bank) to another. The market is competitive and fund performance is transparent.
There are also personal investment plans (PIAS) which offer tax-free withdrawals on retirement if the withdrawal is taken in instalments as a pension.
English speaking financial advisers offer a pension planning service to help individuals work out how much money they will need in their retirement, and what they should be doing about it beforehand. So get in touch with someone who really knows about Pensions in Spain, someone who speaks your language and who can answer all your questions. Give yourself peace of mind and prepare for your retirement, because one thing is for sure; it will happen.
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