If you are close to retirement age and, throughout your professional career, you have worked and accumulated contributions abroad, you should consider what impact this will have on your retirement pension. The reason behind this is that you may be entitled to a retirement pension in several countries or on the other hand, the time you have worked in other countries may not compute in or increase your pension.
In the European Union, the possibility of pooling retirement pensions is regulated by Community Regulations, but outside the EU, the possibility of collecting several pensions will depend on whether there is a legally binding and signed bilateral agreement that specifically allows the contributions made to be taken into consideration (Spain has signed bilateral agreements with Argentina, Australia, Brazil, China, Morocco and Russia, among others).
If, on the other hand, you have worked in several countries between which there is no regulation or a signed bilateral agreement, we regret to inform you that part of the time contributed abroad will not be reflected in your retirement pension.
CONTRIBUTION ABROAD THAT DOES COMPUTE IN THE CONTRIBUTIONS TO COLLECT THE RETIREMENT PENSION
If you know that in the countries where you have worked a Community Regulation or a bilateral Agreement is of application, the first thing you must bear in mind is that you will have access to the respective retirement pensions when you have reached the legal retirement age in each country.
In this regard, in Spain, in order to qualify for retirement, two general requirements must be met:
- To have contributed, at least, 15 years to the Social Security, of which 2 must be included in the 15 immediately prior to the time of retirement; and
- To have reached the legal retirement age. Since 2003, such age has been gradually increasing. In the current year (2021), the legal retirement age is 65 and will reach 67 years old in 2027.
In relation to the contribution abroad, the legal age to receive the retirement pension must be met, in accordance with the legislation corresponding to each country.
COMPUTATION OF THE CONTRIBUTION PERIOD IN THE DIFFERENT COUNTRIES: THE TOTALIZATION OF CONTRIBUTIONS AND THE PRO RATA
If you know that in the countries where you have worked a Community Regulation or a bilateral Agreement is of application and that you have reached the legal retirement age in each of the countries involved, one shall determine how the years contributed in each country are computed and how pensions are paid, with the totalization of contributions, always taking into consideration the pro rata and the EU equivalent rate.
In this regard, the calculations to be made by the corresponding institution in each country to pay the pension at retirement age for a person who has worked in several countries, are as follows (paying the higher of the two pensions):
- National pension: each country must calculate the retirement pension that would correspond to the worker according to national legislation, for contributions made only in that country.
- Totalization of contributions and pro rata (“EU equivalent rate” in the European Union): each country will calculate the amount of the corresponding pension, in proportion to the amount contributed to that country and in reference to the total years contributed in all countries.
Practical Example Of Totalization Of Contributions Abroad
A person who has worked and paid Social Security contributions in Spain for 10 years and in Germany for 30 years (40 years in total) reaches the legal retirement age in both countries.
Upon reaching the retirement age and requesting the retirement pension, Spain should calculate his pension as if the worker had contributed in our country for all 40 years and pay the pensioner only for what he contributed in Spain (10 of the 40 years), so Spain would pay only 10/40 parts of the retirement pension.
On the other hand, Germany shall calculate it in the same manner. This entails calculating the German pension as if the worker had contributed the entire 40 years in that country, thus Germany would pay 30/40 parts of the retirement pension which entails the part proportional to the years worked there.
WHY ARE THE TOTALIZATION OF CONTRIBUTIONS AND PRO-RATA USEFUL?
The totalization of contributions abroad is useful to help workers meet the necessary requirements to collect a retirement pension in the different countries in which they have worked.
As we have mentioned, in Spain, to qualify for a retirement pension, a worker must have contributed for a minimum of 15 years. Therefore, a worker who has contributed for only 10 years, as the exampled above depicted, would not be eligible under the Spanish scheme to receive a national retirement pension. However, having worked in other countries, the national pension will not be calculated with purely Spanish working time, but rather the years worked in other countries (in the example, 30 years in Germany) will also be considered, thus the entitlement would be recognized and a pension proportional to the years worked in Spain will be paid.
Nonetheless, continuing with previous example, if the German requirements for the entitlement to a national pension are met, regardless the period you have contributed in Spain, Germany will also have to calculate the national pension. If this pension is greater than the 30/40 calculation, it will pay the national pension, not the pro rata.
In conclusion, regarding the payment and collection of retirement pensions, each country directly pays the amount of the recognized pension. Thus, if the pensioner resides in the European Union, each country transfers the corresponding amount into the pensioner’s bank account in the worker’s country of residence. If the pensioner does not reside in the EU, he/she must open a bank account in each EU country to receive the respective pensions.
If you live in Spain, you will be able to collect the respective retirement pensions to which you are entitled, in our country.
If you have worked and contributed abroad during your professional career and you want to know if you are entitled to receive a retirement pension in one or several countries, or if you have doubts about the totalization of contributions and what part you are entitled to be paid by each country, it is advisable to consult a specialized retirement lawyer. You can contact our lawyers here.
Lawyer at Labor Department