March 15, 2013 / 2:01 PM / 5 years ago

Spain to restrict early retirement

MADRID (Reuters) - Spain will make it harder for people to take early retirement, in order to increase contributions to the social security system and make it more sustainable, Labour Minister Fatima Banez said at a news conference on Friday.

Spain's Treasury Minister Cristobal Montoro (L), Prime Minister Mariano Rajoy (C) and Labour Minister Fatima Banez arrive for a weekly cabinet control session at Parliament in Madrid March 13, 2013. REUTER/Susana Vera

The new measures will save the social security system 4.5 billion euros a year when they have taken full effect in 2027, the minister said.

Companies will be penalised for letting go older workers, under the new measures. The government will also raise the minimum amount of contributions a worker must make in order to be eligible for early retirement.

“Today early retirement and partial retirement cost the system more than 9 billion euros a year. When these measures go into effect, we will save half of that amount every year,” Banez said.

One out of two Spaniards retire before the current legal age of 65, and the current effective age of retirement is 63, Banez said.

In 2011 the then Socialist government reformed pensions to phase in a higher retirement age of 67, by 2027, and to increase the number of years of contributions required to be eligible for a state pension.

Brussels has recommended that Spain take additional measures to reinforce its social security system, such as introducing more quickly a stability factor that would be applied to make periodic adjustments for demographic factors.

Last year Spain’s social security system, which pays unemployment and retirement benefits, had a deficit of 1 percent of gross domestic product.

Deep in recession, Spain now has almost 6 million people out of work and the number of people taking early retirement has risen sharply.

Writing by Fiona Ortiz

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