20-09-2023

What’s new in partial retirement in 2023?

What is partial retirement?

Partial retirement is retirement commenced after the age of 60, simultaneously with a part-time employment contract, and linked or not to a relief contract concluded with another worker in certain circumstances.

There are two types of partial retirement:

1.The so-called partial retirement with relief contract, which is the one to which the worker has access when he/she reaches the legally established minimum age (for this type of partial retirement) and agrees with the employer to reduce his/her working hours within the legal limits. The worker and the employer sign a part-time contract, and the worker begins to receive the retirement pension that replaces the income lost due to the reduction in working hours. In this modality, the partially retired worker must be replaced by another worker (called a relief worker) who is unemployed, or by a worker from the same company with a temporary contract, whose working hours must be extended.

The requirements for access to partial retirement with a relief contract are as follows:

A minimum contribution period of 33 years at the time of the event giving rise to the retirement pension, without the proportional part of the special payments being taken into account, but with the periods of military service, substitute social service and women’s social service (with a maximum limit of one year).
Have the minimum age required, depending on the accredited contribution period, an age that has been increased in 2023, as indicated below.
A minimum of 6 years of continuous employment with the company, either full-time or part-time.
The hiring of a relief worker by the company, either an unemployed person or an employee of the company who improves their working hours and conditions. The minimum duration of this relief contract must be the time remaining before the partial retiree becomes fully retired.
The contribution base of the relief worker may not be less than 65% of the average of the contribution bases of the last 6 months of the period considered for the calculation of the regulatory base of the partial retirement pension of the partial retiree.

2.Partial retirement without a relief contract occurs when the worker has reached the ordinary legal retirement age (*) and takes partial retirement by signing a part-time contract with the employer. In this case, it is not necessary to sign a relief contract with another worker.

(*) Statutory retirement age: 66 years and 4 months in 2023 if you have less than 37 years and 9 months of contributions. If you have 37 years and 9 months or more of contributions, you can retire at the age of 65.

For access to partial retirement without a relief contract, a minimum contribution period of 15 years is required, of which 2 years of contributions must be within the last 15 years.

What’s new in 2023 for partial retirement with a relief contract?

The new developments relate to two of its requirements.

Partial retirement age with relief contract

The minimum age for access to partial retirement with a relief contract has been increased to 2023. For non-mutual workers, the partial retirement age is subject to the application of a transitional provision that increases it year by year until 2027:

In 2022, the minimum age was 63 years and 4 months in the case of 33 years or more of contributions, or 62 years and 2 months for workers with 35 years and 6 months or more of contributions.
In 2023, the minimum age for partial retirement with a relief contract is 63 years and 8 months in the case of 33 years or more of contributions, or 62 years and 4 months in the case of 35 years and 9 months or more of contributions at the time of retirement.
From 2027 the minimum age for partial retirement will be 63 years for those with more than 36 years and 6 months of contributions, and 65 years in other cases.

Contribution base considered in partial retirement with a relief contract

For the purposes of determining the contribution base and the corresponding contribution to be paid, another transitional provision has been applied from 2013 to 2023. During 2013, the contribution base of a partially retired worker for the part corresponding to his part-time work was the equivalent of 50% of the full-time contribution base. For each year from 2014 onwards, it has been increasing by a further 5% until it reaches 100% of the full-time contribution base in 2023. For example, in 2022, 95% of the full-time contribution base was required.

In 2023, the contribution base, and from this year onwards, the contribution base of the partial retiree will be that which would have been applicable if full-time work had continued.

However, for the purposes of calculating the full retirement pension, in cases of partial retirement with a relief contract, the benefit of the 100% increase in the contribution bases is applied. In other words:

The contribution bases corresponding to the period of part-time work will be taken into account, increased to 100% of the amount that would have corresponded if the same percentage of the working day had been worked in the company during that period before going into partial retirement, provided that it had been combined with a relief contract.
In addition, in order to determine the percentage applicable to the regulatory base for determining the ordinary retirement pension, the period of time between partial retirement and ordinary retirement is taken as the period during which full time contributions have been paid, provided that, during this period, partial retirement was combined with a relief contract.

With regard to the calculation of the full (ordinary) retirement pension in cases of access from a partial retirement situation without a relief contract (without the benefit of 100% of the base), the pensioner can choose between determining the regulatory base by calculating the contribution bases actually paid during the partial retirement situation, or having it calculated on the date on which the partial retirement was recognised.

Calculation of contribution periods in part-time employment contracts

This new measure, introduced by the recent Pension Reform, although it refers specifically to part-time employment contracts, indirectly has a positive impact on all types of partial retirement (not only as regards those with a relief contract but also those without a relief contract), in the transition from partial retirement to ordinary full-time retirement.

From 1 October 2023, as well as for calculating the periods required to qualify for ordinary retirement benefits. The contribution periods paid for part-time work will also be taken into account in full when calculating the contribution period credited for setting the percentage applicable to the regulatory base for determining the retirement pension, regardless of the length of the part-time work.

If you have any queries regarding this issue, please do not hesitate to contact us by telephone at Isabel Torre Carazo or by email at itc@btsasociados.com, we will be delighted to help you.