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For instance, if you’re teaching English in an academy in Madrid on a low-salary contract (i.e. 800 – 1,200 euros), your retirement pension should be pretty low. The worst part isn’t the fact that your retirement is calculated based on your low salary, it’s the fact that you’re not racking up very many days per year.
You may in fact work a lot of days per week, but the number
of days the Spanish government considers when they’re adding
up the number of days you’ve worked is actually based on the
number of hours your academy declares that you’ve worked per
week and per year. i.e. If you haven’t worked but 25 hours per
week for 8 months out of the year, you’ve actually only worked
850 hours. Compare 1,680 hours per year, if you work 40 hours
per week for 10 months of the year, which is almost double.
(Check your total number of days worked in “Tesorería.”) In
other words, you may be working just one-half of a year for
every year worked as far as the Spanish government is concerned.
(In my own case, after having worked in Spain for 13 years,
I still only have eight or nine years racked up. I'd have been
better off if I had simply become an autónomo as soon
as I got here.)
This is just one of the reasons, I think, why working for yourself as an “Autónomo” raises your long-term income dramatically. I’m not sure, but I’ll bet an English academy teachers’ pension at the age of 65 wouldn’t be much higher than the new minimum pension of 565 euros per month.
An “autónomo,” on the other hand, can decide for themselves
just how much to pay into the system. Most “autónomos” pay around
230 euros or so per month to the “Seguridad Social,” which will
add up to around the minimum pension. This amount can be voluntarily
raised, however, up to around 750 euros per month. Most of us
never do so and rightfully so as it wouldn’t seem to pay off
very well most of the time when you’re younger. But, when you’re
getting older, it may very well pay off better than a private
pension plan. (Again, you should double-check all information
for yourself, but I don’t think there are any private pension
plans out there worth the paper their printed on.)
In my case, if I can manage it, I’m seriously considering raising
my monthly Spanish social security payments to the maximum 750
euros per month starting at the age of 49 (I’m 44.). (If you
wait till you’re 50, you no longer have the option to raise
this monthly amount to the maximum.) Raising your pension payments
to the maximum would mean receiving a retirement of around 2,200
– 2,300 euros per month. Apart from this, there would be a chance
(unfortunate, but true) that I might kick the bucket before
the age of 65 (my retirement age), but if I did, my spouse would
receive a widow’s pension of 50% based on calculations with
this monthly payment and not with the 230 euros per month that
I’m currently paying (the pension for my child would be 25%
until the age of 18).
It’s a shame, but the above is only true IF the government doesn’t
renege later on and IF the Social Security system doesn’t crash
under the tremendous burden of millions of un-replaced baby
boomers. Whatever the reasons, I think the trend will be towards
lower pensions in the future. (I don’t agree with politician’s
excuses, but that’s a different story.)
In fact, Spain’s political parties have just come to an agreement to a “minimalist” reform of the retirement system and the common folk are just a bit worse off today than yesterday regarding the number of days they have to work before they have a right to a State pension. (Qué Diario - July 14, 2006) You can expect a bigger reform or two at some time in the future as a reaction to the baby boom crisis approaching.
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