How pensions are updated
Pensions are dynamic and change over time. Once you have calculated what your retirement pension will be and start collecting it, each year it will be updated. In other words, its value will be adjusted according to certain parameters.
In addition, this revaluing of state pensions is not static and depends to a large extent on political agreements and the numbers of the system itself. In fact, it is one of the key points in terms of the pension system’s sustainability.
Given that the current model may change (and is likely to do so in the future), this is the way pensions are currently updated and the proposals for change that are on the table.
How pensions are revalued
The revaluing of pensions refers to the way in which the amount of the state retirement pension is updated each year.
This revaluation is established by Law and throughout history a number of mechanisms have been used to increase pensions so that pensioners do not lose their purchasing power. The current model is governed by Royal Decree 1058/2022, of December 27, on the revaluation of Social Security system pensions, Passive Class pensions and other state social benefits for the financial year 2023 and Royal Decree-Law 2/2023, of March 16, on urgent measures for the extension of pensioners’ rights, the reduction of the gender gap and the establishment of a new framework for the sustainability of the state pension system.
According to the document, which follows the recommendations of the Toledo Pact, the pension revaluation is linked to the CPI or Consumer Price Index. Specifically, it is established that pensions will go up in line with the average variation of the CPI from the previous year.
What happens if the CPI does not go up or is negative? In that case, pensions will remain the same, in other words, their amount will not be reduced.
This measure helps pensioners maintain their purchasing power in the face of increasing inflation. In addition, the new rule eliminates the compensatory payment that was previously given to pensioners to cover the difference between the increase in pensions each year and the subsequent evolution of the CPI.
How did it work before?
It now remains to be seen whether this system will be maintained, there will be a return to the previous model or a different formula will be introduced.
In this regard, the previous pension revaluation model was implemented in 2013, but was only applied until 2018. At that point it was temporarily suspended, until now. This system applied the so-called Pension Revaluation Index, regulated by Law 23/2013.
The Annual Revaluation Factor linked the increase in pensions to elements such as variations in the system’s income, the number of pensions paid out, and the difference between the income and expenditure of contributory benefits. In other words, elements that affect the sustainability of the system.
Before the introduction of this index, pensions were updated according to the CPI in two phases. At the beginning of the year, the Executive estimated the expected inflation rate for the year and updated pensions accordingly.
If the CPI later rose more, the difference was compensated for with an additional income, commonly referred to as a “paguilla”.
Maximum and minimum pension
Pension revaluation applies to all benefits in general. However, there is a maximum pension rate that cannot be exceeded.
For example, in 2023 benefits greater than 3,058.81 euros did not increase, since that figure marks the general maximum monthly pension (in 14 payments). In any case, no state pension (or concurrent state pensions) can exceed 42,823.34 euros, including various supplements.
These are the minimum amounts according to the type of pension:
Retirement
| Retirement at 65 | Monthly amounts | Annual amounts |
| With dependent spouse | 966.20 | 13,526.80 |
| Without spouse (single-person economic unit) | 783.10 | 10,963.40 |
| With non-dependent spouse | 743.30 | 10,406.20 |
| Retirement at 65 due to severe disability | Monthly amounts | Annual amounts |
| With dependent spouse | 1,449.30 | 20,290.20 |
| Without spouse (single-person economic unit) | 1,174.70 | 16,445.80 |
| With non-dependent spouse | 1,115.00 | 15,610.00 |
Permanent Disability
| Severe disability | Monthly amounts | Annual amounts |
| With dependent spouse | 1,449.30 | 20,290.20 |
| Without spouse (single-person economic unit) | 1,174.70 | 16,445.80 |
| With non-dependent spouse | 1,115.00 | 15,610.00 |
| Absolute or total disability at 65 | Monthly amounts | Annual amounts |
| With dependent spouse | 966.20 | 13,526.80 |
| Without spouse (single-person economic unit) | 783.10 | 10,963.40 |
| With non-dependent spouse | 743.30 | 10,406.20 |
| Total disability between 60 and 64 | Monthly amounts | Annual amounts |
| With dependent spouse | 905.90 | 12,682.60 |
| Without spouse (single-person economic unit) | 732.6 | 10,256.40 |
| With non-dependent spouse | 692.5 | 9,695.00 |
| Partial disability under the work-related accident scheme (worker aged 65) | Monthly amounts | Annual amounts |
| With dependent spouse | 966.2 | 13,526.80 |
| Without spouse (single-person economic unit) | 783.10 | 10,963.40 |
| With non-dependent spouse | 743.30 | 10,406.20 |
Widow/Widower
| Monthly amounts | Annual amounts | |
| With family dependents | 905.90 | 12,682.60 |
| 65 years old or disabled=>65% | 783.10 | 10,963.40 |
| Between 60 and 64 years old | 732.60 | 10,256.40 |
| Under 60 years old | 593.30 | 8,306.20 |
Orphan
| Monthly amounts | Annual amounts | |
| Per beneficiary | 239.50 | 3,353.00 |
| Per beneficiary under 18 years of age with disability >=65% | 470.90 | 6,592.60 |
| Absolute orphan | ||
| Single beneficiary | 832.80 | 11,659.2 |
| Several beneficiaries (N) | 239.50 + 593.30 / N | 3,353.00 + 8,306.20 / N |
| Orphans benefit | ||
| Single beneficiary | 700 | 9,800.00 |
| Several beneficiaries (N) | 1,180 | 16,520.00 |
Family benefit
| Monthly amounts | Annual amounts | |
| Per beneficiary | 239.50 | 3,353.00 |
| If there are no widow or orphan beneficiaries | ||
| Single beneficiary aged 65 or older | 578.50 | 8,099.00 |
| Single beneficiary under 65 | 545.20 | 7,632.80 |
| Several beneficiaries (N) | 239.50 + 353.80 / N | 3,353.00 + 4,953.20 / N |
Compulsory Old Age and Disability Insurance (SOVI)
| SOVI Pensions | Monthly amounts | Annual amounts |
| Olg age, disability and widow/widower | 501.50 | 7,021.00 |
| Concurrent SOVI benefits | 486.80 | 6,815.20 |
| Income limit (excluding pension) | Annual amount |
| With non-dependent spouse | 8,614.00 |
| With dependent spouse | 10,048.00 |
| Without spouse (single-person economic unit) | 8,614.00 |
Table source: La Revista de la Seguridad Social
The maximum payment, as we have seen, is 3,058.81 euros per month and 42,823.34 euros per year.