Modern careers are increasingly international. You may have started your working life in one country, moved abroad for several years, and eventually decided to retire somewhere else, such as Spain.
But what happens to the pension contributions you made in each country?
Working in different countries does not necessarily mean losing the pension rights you built up along the way. Depending on the countries involved, international social security rules may allow periods of insurance or contributions to be taken into account when determining your entitlement to a pension.
However, this does not usually mean that all your contributions are transferred into one national pension system. In many cases, each country remains responsible for the pension rights accumulated under its own system.
Understanding how these rules work is particularly important if you are planning to retire in Spain after an international career.
Can You Receive a Pension If You Have Worked in Several Countries?
In many cases, yes.
If you have worked and paid social security contributions in several countries, the periods completed in those countries may be taken into account when assessing whether you meet the minimum requirements for a pension.
This is particularly relevant within the European Union, where social security coordination rules apply between EU countries, as well as Iceland, Liechtenstein, Norway and Switzerland. These rules are designed to prevent people from losing social security rights simply because they have worked in more than one country.
However, your contributions are not simply transferred from one country to another.
Instead, each country generally keeps a record of the periods during which you were insured there and, where the relevant requirements are met, calculates and pays its own share of your pension.
For example, someone who has worked in Spain, France and Germany may ultimately receive pension payments from more than one country.
How Does International Pension Coordination Work?
The key concept is the coordination of different social security systems.
Within the EU system, periods of insurance completed in different countries can be taken into account when necessary to establish entitlement to a pension. If a person does not have enough insurance periods in one country to qualify independently, periods completed in another country may help meet the relevant requirement.
Once entitlement has been established, each country generally calculates the pension corresponding to the periods completed under its legislation.
This means there are two separate questions:
- Do you qualify for a pension?
- How much does each country pay?
The answer to these questions can involve more than one national system.
For example, if you have spent part of your career working in Spain and another part in France, the relevant authorities may take your combined insurance history into account when assessing your entitlement. Each country can then calculate the amount payable under its own rules.
The exact calculation depends on the countries involved and the applicable international agreement.
What Happens If You Have Worked in Several EU Countries?
The European coordination system provides a framework for people who have worked in several EU countries, as well as Iceland, Liechtenstein, Norway and Switzerland.
Each country where you were insured keeps your insurance record. Generally, if you have been insured in a country for at least one year, that country will pay a retirement pension when you reach its applicable pension age. Shorter periods can be treated differently and may be taken into account by other countries when calculating entitlement.
This can mean receiving separate pension payments from different countries.
Another important point is that pension ages may not be the same in every country. You could therefore become entitled to a pension from one country before reaching the pensionable age applicable in another.
If you have worked in several countries, it is therefore important to check the rules of each system before deciding when to retire.
What About the UK After Brexit?
For people who have worked between Spain and the UK, the position is more complex than it was before Brexit.
EU social security coordination rules stopped applying to the UK from 1st January 2021. However, people covered by the EU-UK Withdrawal Agreement continue to have their social security rights protected. For people outside the scope of that agreement, social security coordination between the UK and EU is governed by the relevant Protocol of the EU-UK Trade and Cooperation Agreement.
The UK also confirms that relevant periods of contributions made in the EEA, Switzerland or countries with which it has a social security agreement may be taken into account when determining entitlement to the UK State Pension. However, the calculation of the amount payable is based on the UK National Insurance record and the applicable rules.
If you have worked in both Spain and the UK, it is therefore important to establish which coordination rules apply to your particular periods of residence and employment, rather than assuming that the pre-Brexit rules automatically apply.
What If You Have Worked Outside Europe?
The position can be different when your career includes countries outside the European coordination system.
Spain has bilateral Social Security agreements with a number of countries, including the United States, Canada, Mexico, Australia, Argentina, Brazil, Chile, Colombia, Morocco, Peru, Uruguay and Venezuela, among others. Spain also participates in the Multilateral Ibero-American Social Security Convention.
These agreements can establish rules for coordinating social security coverage and pension rights between Spain and the country concerned.
However, there is no single rule that applies to every country.
The agreement may determine, among other things, whether periods of insurance can be combined, how pension entitlement is assessed and how benefits are paid.
For this reason, someone who has worked in Spain and the United States may be subject to different rules from someone who has worked in Spain and a country with which Spain has no applicable Social Security agreement.
Where Do You Apply for Your Pension?
If several countries are involved, you do not necessarily have to submit completely separate applications to every pension authority.
Under the EU coordination system, a person who has worked in several participating countries will generally apply in the country where they live. If they have never worked in their country of residence, the application can generally be made through the country where they last worked. The relevant institution then coordinates with the other countries involved.
Spain’s Social Security system also provides specific procedures and forms for pensions covered by bilateral agreements and the Multilateral Ibero-American Social Security Convention.
The authorities involved exchange information about your insurance history and the decisions made by the different pension systems.
Because international pension claims can involve several administrations, it is advisable to start the process well in advance of your intended retirement date.
What Happens If You Retire in Spain?
Retiring in Spain can involve two separate areas that should not be confused:
Social security and pension entitlement determine whether you are entitled to receive a pension and which country or countries are responsible for paying it.
Tax residence determines how your pension income may be taxed once you live in Spain.
If you become a tax resident in Spain, you are generally subject to Spanish personal income tax on your worldwide income, subject to the provisions of any applicable double taxation agreement. This can include pensions received from another country.
The tax treatment of a foreign pension depends on the country paying it and the applicable tax treaty. Depending on the treaty and the type of pension, taxing rights may belong exclusively to Spain, exclusively to the country of origin, or in some circumstances be shared between the two countries with mechanisms to prevent double taxation. Public-sector pensions can also be subject to different provisions from private-sector pensions.
Therefore, receiving a foreign pension while living in Spain is not simply a question of where the pension is paid. Your tax residence and the specific tax treaty applicable to the pension should also be considered.
What Documents Should You Keep?
If you have worked internationally, keeping a complete record of your employment and social security history can make the retirement process much easier.
Useful documents may include:
- Employment records from each country
- Social security or National Insurance records
- Pension statements and forecasts
- Identification documents
- Evidence of periods of residence where relevant
- Previous correspondence with pension authorities
- Bank details for pension payments
- Documentation relating to international Social Security agreements
Within the EU system, much of the information is exchanged directly between social security institutions, but keeping your own records is still advisable.
Planning an International Retirement
If you have worked in several countries and are considering retiring in Spain, it is worth reviewing your situation before you reach retirement age.
In particular, consider:
- Where you have paid social security contributions.
- How many years or periods you were insured in each country.
- Whether Spain has a bilateral or multilateral Social Security agreement with those countries.
- The pensionable age and eligibility requirements in each system.
- Where and how you need to submit your pension application.
- Where you will be tax resident after retirement.
- How your different pension payments may be taxed.
Planning ahead can also help identify missing contribution periods or documentation while the relevant records are easier to obtain.
International Retirement and Moving to Spain
Retiring in Spain after working in several countries can involve different pension systems, retirement ages and tax rules. International coordination mechanisms may allow periods of insurance to be taken into account and, depending on the countries involved, you may receive pension payments from more than one system.
If you are planning to retire in Spain, it is important to consider both your international pension rights and the Spanish tax implications of becoming a resident.
At Fuster & Associates, we assist international clients with the legal and tax aspects of living and retiring in Spain. If you are planning to retire in Spain after working in different countries, contact our team to discuss the Spanish legal and tax considerations that may apply to your situation.
We want to help you navigate all the legal complexities that come with your home buying in Spain, but this article is legal information and should not be seen as legal advice.
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