Pre-retirement is an agreement between a company and a worker so that the worker stops working before the legal retirement age in exchange for an income or financial compensation that covers, totally or partially, the time remaining until they can access ordinary or early retirement. That is, it is not a type of Social Security pension.
During that period, the worker is not retired. The usual thing is that you first go through the contributory unemployment benefit and, if you meet the requirements, then the subsidy for those over 52 years of age, until finally applying for the retirement pension. An economic supplement paid by the company, agreed within the exit agreement, can be added to these public benefits. The sum of both amounts seeks to get closer to the previous net salary, although in most cases it represents an economic loss that can be carried over permanently if early retirement is finally accessed with reducing coefficients or if the contribution bases of recent years are lower.
Early retirement became popular in the restructuring processes of banking, energy, telecommunications and large industries starting in the 1990s. It is usually articulated through an employment regulation file (ERE), an incentivized leave plan or collective agreements. Article 51 of the Workers’ Statute regulates collective dismissals. Furthermore, the sixteenth additional provision of Law 27/2011, developed by Royal Decree 1484/2012, provides for financial contributions to the Public Treasury in certain collective dismissals that affect workers aged 50 or over in companies with benefits.
What is the difference between early retirement and early retirement?
They are different figures, although in everyday language they are sometimes confused. Early retirement is a type of public pension regulated in the General Social Security Law by which the person stops working and begins to collect the pension before the ordinary age, with the corresponding reduction in its amount.
Early retirement, on the other hand, is a private exit agreement. The company agrees on an income, a supplement or compensation, and the worker remains unemployed or in a situation similar to unemployment until the time comes to request early retirement or ordinary retirement.
| Feature | Early retirement | Early retirement |
|---|---|---|
| Who regulates it | Agreement between company and worker | General Law of Social Security |
| Who pays | Company, SEPE and, later, INSS | INSS from the moment the pension is born |
| Minimum age | There is no specific legal age | Up to 4 years before the ordinary age in the involuntary and up to 2 years before in the voluntary |
| Worker situation | He is not retired | He is already a pensioner |
| When do you receive a pension? | When you apply for retirement | Since the recognition of the pension |
| Reduction | Only when you access the pension, if it is early | Applies from the beginning |
A pre-retired worker is not retired. You only become a pensioner when you request and obtain early or ordinary retirement.
What is the typical path of an early retirement?
The economic path of early retirement is not identical in all cases, but it is usual for the worker to go through several phases until receiving a pension. The company can complement this journey with a monthly income, an initial compensation or a mixed formula.
Phase 1. Contributory unemployment benefit.
After the termination of the contract, the worker can access unemployment if he or she is legally unemployed and meets sufficient contributions. The duration depends on the unemployment contributions accumulated in the six years prior to termination and can reach a maximum of 720 days. The general amount is 70% of the regulatory base during the first 180 days and 60% from day 181, with the minimum and maximum amounts set.
Phase 2. Unemployment benefit for people over 52 years of age.
When the contributory benefit is exhausted, the worker can access the subsidy for those over 52 years of age if they meet the legal requirements. Among them, being 52 years old or older, having contributed at least 6 years for unemployment throughout one’s working life, not having income higher than the legal limit and meeting all the requirements for contributory retirement except age. This subsidy is equivalent to 80% of the IPREM and is received until reaching the ordinary retirement age. During that time, the SEPE contributes for retirement for a base equivalent to 125% of the current minimum contribution base.
Phase 3. Early retirement or ordinary retirement.
When the time comes, the worker applies for the pension. If the termination was involuntary and you meet the required requirements, you will be able to access early retirement up to four years before your ordinary age. If access is voluntary, the maximum advance is two years. In 2026, the ordinary retirement age will be 65 years for those who have at least 38 years and 3 months of contributions, and 66 years and 10 months for those who do not reach that period. If early retirement is chosen, reducing coefficients will be applied to the pension.
What supplement does the company pay?
The company can agree with the worker on different economic formulas to cover the period prior to retirement. There is no single model or minimum legal amount. It all depends on the agreement reached in the ERE, in the incentivized leave plan or in the individual agreement.
The most frequent formulas are these:
- Monthly income during early retirement. The company pays a periodic amount until a certain age or until you access retirement.
- Compensation raised at the time of termination. The worker receives a single amount and manages that money over the following years.
- Mixed formulas. They combine an initial compensation with a monthly income for a period of time.
In many agreements, the sum of the public benefit and the business supplement attempts to be a percentage of the previous net salary, although this percentage depends entirely on the agreement reached. The supplement is taxed in personal income tax as income from work or with the corresponding tax treatment depending on its specific nature.
Can the company force a worker to take early retirement?
No. Early retirement, understood as an agreed exit with income or supplements, requires acceptance by the worker. The company can propose it within an ERE or an incentivized leave plan, but it cannot impose it as if it were a legal form of retirement.
Another thing that is different is that the company can terminate contracts through the means provided for in labor legislation, including the collective dismissal of article 51 of the Workers’ Statute. In this context, early retirement works as a negotiated exit formula, not as an obligation imposed by Social Security.
Do I have to sign a special agreement with Social Security?
In many early retirement processes, yes. During the contributory benefit and, where applicable, during the subsidy for those over 52 years of age, there are Social Security contributions. However, if between the end of this coverage and access to retirement there are periods without sufficient contributions, the worker can sign a special agreement to maintain or reinforce their bases.
In the ERE of large companies and, especially, in banking, it is common for the agreement to include the company financing this special agreement for several years. This coverage is relevant because it avoids contribution gaps or reduces the deterioration of the regulatory basis of the future pension.
How does early retirement affect the pension?
Early retirement can affect the final pension, since, according to the current calculation method, it depends on three factors:
- The contribution bases that enter into the calculation of the regulatory base.
- The total years of contributions, which determine the percentage of the regulatory base you are entitled to.
- The possible application of reducing coefficients, if early retirement is accessed.
In 2026, the regulatory basis for the retirement pension is no longer correctly explained by only saying that the last 300 bases are taken. The current regulations establish a broader calculation system, so the more time the worker spends outside of ordinary employment and with lower bases, the greater the impact may be on the future pension.
Unemployment contributions and the subsidy for those over 52 also contribute for retirement, but normally with lower bases than those that the active worker had. If, in addition, early retirement is granted, the cut due to reducing coefficients is added to the fall that the regulatory base may have suffered.
In which sectors is early retirement most common?
Early retirement has been especially frequent in sectors with large workforce adjustment processes. These include banking, insurance, energy, telecommunications, some large industries and, at certain times, also the media and large business groups.
In Spain it has been a common formula in restructuring financial institutions, large energy companies and companies with aging workforces. Its use responds to business reorganization strategies and the desire to reduce staff without resorting exclusively to layoffs without financial support.
Is it compatible with another activity?
It depends on the phase in which the worker is and the type of income he or she receives.
While you receive the contributory unemployment benefit or the subsidy for those over 52 years of age, the rules of compatibility and incompatibility of these benefits govern. In the case of the subsidy, the income limit is especially important and a new work activity or certain income may cause its suspension or termination.
Regarding the business complement of early retirement, its compatibility will depend on the exact content of the signed agreement and the legal nature of the amount received.
Once the retirement pension is recognized, compatibility with work is no longer governed by the rules of early retirement, but by the legal modalities provided for in Social Security. Among them is active retirement, although it cannot be taken for granted in all cases, since it requires specific requirements to be met and is not automatically applicable to anyone who has accessed early retirement.