Young people in Spain will have to retire at 71 to get decent pension

Young Spaniards unable to enter the job market will pay a price for it later in life by having to work into their seventies, a new report has revealed.

“The Present and Future of Spanish Youth” study presented by the BBVA Foundation and the Valencian Institute of Economic Research, calculates that younger Spaniards starting their careers later in life will be forced to delay their retirement age to 71 if they want to maintain their standard of living and receive a full pension.

In other words, it would be necessary to have more (40 or more often) years of social security contributions, something you can’t do unless you’re working. The alternatives are receiving a smaller pension or non-contributory pension.

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Youth unemployment has long been a social problem in Spain, but previously it was assumed that the issue would mainly affect factors like gaining independence and getting on the housing ladder, rather than unemployment would also store up problems much later down the line.

According to the latest employment data, the unemployment rate in Spain for men under 25 (26.0 percent) is the highest of all EU member states. The rate for women is 27.1 percent and also the highest in the EU.

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“Later access to employment will make it more difficult for today's young people to complete sufficiently long careers and, therefore, they will have to remain in the labour market longer to obtain a pension that will allow them to maintain their standard of living,” the report states, outlining the problem.

This is also reflected in the employment data in the study, which states that the employment rate is just 43.2 percent among 16- to 29-year-olds in Spain, 15 percent lower than in 2007, the year before the financial crisis.

This late entry into the job market means that many young people will reach 2065, the year the study forecast, having only made contributions for 30 years, which will then penalise their pension calculations.

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From 2027 onwards, the standard retirement age will be 67 years and 37 years of contributions will be required to receive 100 percent of the pension, although this age may be reduced to 65 if 38 and a half years of contributions are reached.

This means that those who retire in 2065 and have only been able to contribute for 30 years will have to compensate for their lower contributions by delaying their retirement until the age of 71 if they want to maintain their previous standard of living.

“The shorter the working life, the lower the pension will be, i.e. the pension will be lower in relation to the last salary. This, combined with lower base salaries, could lead to problems of adequacy and, therefore, a lower level of well-being both during working life and after retirement,” the study warns.

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