The average retirement pension is now 1,370 euros a month in Spain

The Ministry of Inclusion, Social Security and Migrations have published new data which highlights that the total amount being paid out in pensions is now close to 12 billion euros a month, 10.8% more than a year ago, mainly due to their revaluation with the CPI (Cost of Living Increase) of 8.5% approved for this year.

In February, more than ten million pensions were paid to more than nine million people in Spain, the main one being the retirement pension for 6.2 million people, of which 60.6% are men. Next is the widow's pension received as the main benefit by 1.6 million people, 95.9% of them women.

After the readjustment with the CPI, the average retirement pension stood at 1,371 euros, 9.8% more than in February last year, while the average pension for the system as a whole (including widows, orphans, permanent disability, etc) is 1,191 euros per month, with the same increase.

The statistical average, like all, includes very different pensions: there are 443,521 pensioners who receive the maximum benefit of 3,059 euros per month and 4.3 million who receive less than the minimum wage (1,080 euros per month); the rest (4.26 million) are between the minimum salary and the maximum pension.

Pension costs have also risen because those who are retiring now are generally doing so with higher value pensions, because their contributions have been higher, than those who leave the system upon death. In fact, the new retirees in the general regime (employed) have done so with an average pension of 1,764 euros per month in January of this year.

PENSIONS ARE COLLECTED FOR MORE THAN 18 YEARS:
The average age that people start receiving a pension in Spain is 62.4 years old, and the age they stop, due to death, is 80.5 years on average. This means, that the benefit is being collected for around 18 years on average.

Bearing in mind that the substitution coefficient in Spain (the percentage that the pension represents with respect to the last salary) is around 70%, the highest in Europe, and that pensions will continue to rise by law with inflation and that as the 'baby boom' generation retires, spending tensions in the system become increasingly relevant.

The amount of the pension received depends on the contributions made and the years of contributions via social security. The reform of the system to which the Government has committed to Brussels, may end up affecting both variables in such a way that contributions and the contribution period over which the pension is calculated increase.

This year, for the first time, an additional contribution of 0.6% is applied on the basis of common contingencies, which corresponds to the so-called intergenerational equity mechanism.

However, economic growth mitigates this pressure: pension spending represents 11.7% of GDP in the last twelve months, the same percentage as in 2022, but lower than in 2020 (12.4% of GDP), and that of 2021 (12.1% of GDP).

However, a recent report by the Bank of Spain underlines that pension spending in Spain (measured as a percentage of GDP) is higher than the European average despite the fact that it has fewer beneficiaries.

In Spain, the legal retirement age (67 years to be reached progressively in 2027) is higher than in countries like France, where the government's decision to raise the minimum age from 62 to 64 years caused massive protests.

In addition to economic growth, the increase in employment would have a positive impact in balancing the Social Security accounts. The Bank of Spain report calculates that if the employment rate were to rise to the level of the German economy in the coming years, it would offset the 42.6% of the increase in pension spending expected by 2050.

THE AVERAGE RETIREMENT PENSION EXCEEDS 1,370 EUROS PER MONTH:
The average retirement pension is now 1,370.80 euros a month, however, it is very different when comparing by type of employment. The average retirement pension from the General Scheme (being employed) is 1,530 euros per month, while the lowest is registered by the Self-Employed (autonomos), at 912.9 euros/month.

The average amount of new retirement registrations in the system rose in the month of January 2023 (latest data) to 1,639.60 euros per month, and the average widow's pension is 849 euros per month.