The Government Expands Flexible Retirement

The Council of Ministers has approved the Royal Decree regulating the legal framework for flexible retirement, implementing the review of this retirement scheme agreed within the framework of the Social Dialogue Table.

According to the Ministry of Inclusion, Social Security and Migration, the measure aims to encourage the voluntary return of pensioners to the labour market and improve the compatibility between employment and retirement pensions.

The new regulation will enter into force three months after its publication in the Official State Gazette (Boletín Oficial del Estado – BOE) and forms part of the pension reform agreed by the Government and the social partners in 2024. The reform includes measures designed to facilitate the transition between employment and retirement, promote the compatibility of work and pensions, encourage deferred retirement and support a return to economic activity.

One of the main changes introduced by the Royal Decree is the possibility of combining a retirement pension with self-employment.

Until now, flexible retirement allowed pensioners to combine the receipt of their pension with part-time employment. Under the new regulation, individuals carrying out self-employed activities may also benefit from this scheme, provided that they have not been registered as self-employed during the three years preceding their retirement date.

In these cases, pensioners may receive up to 25% of their pension while carrying out the compatible activity.

The new regulation removes the requirement to wait for a minimum period after retirement before applying for flexible retirement.

As a result, flexible retirement may be requested at any time once the contributory retirement pension has been granted.

For individuals combining their pension with part-time employment, the permitted working-time range has been expanded from the previous 25%-75% threshold to 33%-80%.

In addition, the amount of the pension will continue to be reduced in inverse proportion to the reduction in working hours.

The regulation introduces additional financial incentives for individuals who access flexible retirement at least six months after retirement.

Where part-time working hours range between 55% and 80% of a full-time schedule, the pension amount will be increased by an additional 25%.

Where working hours are equal to or greater than 33% but below 55%, the additional increase will be 15%.

During the period of flexible retirement, individuals will retain their status as pensioners for healthcare and social protection purposes.

Furthermore, individuals who previously took involuntary early retirement and later return to full retirement after a period of flexible retirement will benefit from an improvement to their initial pension through the recalculation of their regulatory base and the applicable percentage based on their accredited contribution period.

The new regulation will apply across all Social Security schemes.

However, it does not apply to the special schemes covering State Civil Servants, members of the Armed Forces and personnel serving within the Administration of Justice.

According to the Ministry of Inclusion, Social Security and Migration, the approved changes complete the reforms initiated in 2021 and implement the tripartite social agreement reached in 2024, aimed at making the transition between employment and retirement more flexible and bringing the effective retirement age closer to the statutory retirement age.

The Minister of Inclusion, Social Security and Migration, Elma Saiz, stated that the objective of the new regulation is to provide workers with more options when retiring or combining employment with a pension through an enhanced flexible retirement scheme.

The Ministry’s press release also highlights the evolution of different retirement schemes in recent years, noting the increase in deferred retirements, the reduction in the proportion of early retirements and the growth in active retirement arrangements following the reforms introduced in this area.

At ILIA ETL GLOBAL, we closely monitor legislative developments in employment and Social Security matters to keep companies, executives and employees informed about regulatory changes affecting employment relationships and social protection.