How does flexible retirement work? Find out how to combine work with your retirement pension

When you are planning your savings to improve your future and you analyse your expected retirement thoroughly, you have to work out the pension you will be entitled to as well as the fixed expenses you will have and how much you can save.

Another possible option is to continue working while drawing your pension after retirement. There are different options that allow this. In Spain, flexible retirement enables pensioners to receive some pension and have a part-time job. This measure is designed to encourage retirees to re-enter the labour market and improve the sustainability of the pension system. Flexible retirement, in detail, has certain specific characteristics.

What is flexible retirement?

First of all, let’s take a closer look at the definition of flexible retirement. This is a type of retirement that applies when someone has fully retired but wants to combine their pension with a part-time job. In other words, they return to the labour market, but with reduced working hours of between 25% and 50%.

A new employment contract is therefore drawn up, and the Social Security system must be informed of the situation so that it can apply the reduction in the pension. This will be proportional to the working hours of that person. 

Workers on flexible retirement will continue making contributions until they fully retire, at which point they will receive their full pension. It is important to remember that the employer of the pensioner opting for flexible retirement cannot be the same as the one they had before they retired. 

Who can apply for flexible retirement?

This option can be applied for by workers in all Social Security Schemes, except for the Special Schemes for Civil Servants, Armed Forces personnel and the Administration of Justice.

Recalculation of the pension after final cessation of the work activity

When you decide to opt for flexible retirement and choose to work part-time, your pension is initially reduced. However, the contributions you make during this period of part-time work will have a positive effect on your final pension when you decide to retire permanently. In other words, the additional contributions will help to increase the amount of your final pension after you stop working part-time.

Requirements for flexible retirement

As mentioned above, a pensioner opting for flexible retirement must meet the following criteria:

• The individual must have retired, meaning they must be receiving a pension and be out of the labour market.
• They must have a firm job offer.
• Their return to work must be through a part-time contract, with a working hours reduction of between 25% and 50% compared to a full-time worker. 
• They cannot be self-employed.
• For the duration of the part-time contract, contributions are paid under the same rules applying to any other worker.
• Flexible retirement may not be combined with any permanent disability benefits arising due to the activity performed after retirement, regardless of the Scheme under which these pensions are generated.
• The flexible retirement pension can be received alongside temporary disability or maternity benefits related to the part-time activity.

How to access flexible retirement

According to Social Security, the retired pensioner must inform the authorities of their intention to opt for flexible retirement before starting their new job. This is because the pension amount will be reduced in inverse proportion to the reduction in working hours. 

Those who are legally retired and interested in applying for flexible retirement must submit their application to the Social Security offices before starting work, providing proof of a firm job offer. 

It is important to note that the reduction in pension payments will take effect from the day the contract begins. 

Differences between flexible retirement and the different types

The answer to the question of whether it is possible to continue working and receive your pension is yes, it is possible to combine retirement with a job. However, it will depend on your situation and the type of retirement scheme you are interested in. Let’s take a look at the main differences between flexible retirement and the other options that are compatible with an employment contract.

Differences between active retirement and flexible retirement

The main difference lies in the nature of the retirement itself. While in flexible retirement, the individual has already left the labour market and wants to return, combining salary and pension, active retirement offers a transition into retirement without leaving the workforce completely, hence its name. 

A pensioner who opts for active retirement can work full-time or part-time while receiving 50% of their pension for the duration of their contract. 

In this way, they can combine the contributory pension with any type of employment, with no limit on working hours. However, this is done with a reduced contribution. To qualify for active retirement, the individual must retire at the ordinary retirement age and have contributed enough to be eligible for 100% of their corresponding pension. 

In general, it is possible to combine employment with receiving 50% of the retirement pension. Another key difference from flexible retirement is that contributions made during active retirement do not generate new entitlements, so there is no recalculation or increase in the pension amount. Instead, the full pension will simply be resumed upon final retirement. 

Additionally, self-employed workers who employ at least one employee can receive their full pension during active retirement. In contrast, flexible retirement only applies to part-time employment as an employee.

Difference between flexible retirement and partial retirement

In partial retirement, the worker who has reached the legal retirement age continues to work part time (25%-85% of the time). Partial retirement is considered to be that which begins after the age of 60 and where there is a part-time employment contract.

Again, the main difference between the two lies in the way they are accessed. In flexible retirement, the individual is already retired and chooses to return to the labour market under this scheme.

In the case of partial retirement, the reduction in working hours or part-time contract depends on the type of partial retirement, which can be with or without a replacement contract. They must meet all the requirements to receive a contributory retirement pension. In other words, prove a minimum contribution period: 15 years, two of which must be included within the 15 years leading up to retirement. 

When the retirement age is lower than the normal retirement age, a relief contract or a fixed-term contract is mandatory. In contrast, in flexible retirement, the person is already a pensioner and returns to work.

Partial retirement for the self-employed is possible, although the final terms and conditions for accessing this option have not yet been laid down in the regulations.

Other retirement options

Let us tell you about other options allowing you to work after retirement. Take note!

• Early retirement. his refers to applying for early retirement, with a minimum age of two years less than official retirement age, which in 2025 is 66 years and 8 months for those who have contributed less than 38 years and 3 months. Current legislation allows individuals to apply for this type of early retirement, but only if they meet the requirements of being employed and having reached 64 years and 8 months in 2025, for those who have contributed less than 38 years and 3 months. Of course, you can withdraw money from your pension scheme when you retire early, even if you still have a job. 
• Normal retirement. This is the most common form of retirement and it is what workers do when they reach the retirement age established by law, at the age that corresponds to them. However, it is still possible to combine the public retirement benefit with work, although in these cases the worker will only receive half of the pension that corresponds to them.
• Delayed retirement. In this case a worker has not actually retired, that is, they retire at a later age than the age at which they are entitled to retire. In this option, they will not be able to earn any retirement benefit from the pension scheme, although continuing to work beyond retirement age has incentives under this option. In this case, it is driven by an increase in the pension, with the intention of extending their working life. The pension will rise by between 2% and 4% for each full year contributed beyond the corresponding age.

Is it possible to receive 100% of the retirement pension and keep working?

The Spanish General Social Security Law includes the option of being self-employed and, at the same time, receiving 100% of the retirement pension, as long as the annual income derived from this activity does not exceed the Minimum Interprofessional Wage (Salario Mínimo Interprofesional - SMI) set for that year. Although these pensioners are not obliged to pay Social Security contributions, they must comply with the tax responsibilities of self-employed workers.