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Issues March 2011-Transferring Pension Rights

Applicable Law

The granting of old age pensions for people who have worked in 2 or more EU member states is regulated in accordance with EU Law 1408/71 and 574/72 in relation to social security matters.

Who does this Law Apply to?

Citizens of EU member states or the European Economic Space who are either employees or self-employed workers and who are or who have been subject to the legislation of more than one member state.

Where to Apply for the Pensions

Applicants should apply for the pension in the appropriate authority in each country corresponding to the time worked in each state. In the case of Spain, you would need to contact the Centro de Informacion de la Seguridad Social (CAISS) nearest to where you live. You can also contact them by phone on 0900 166565.

How to Apply for the Pensions

If you have worked in 2 member states (e.g. the UK and Spain), the application forms of both states include a section regarding contributions made in other states and in which you will need to complete all the relevant information regarding these contributions. For example, if you are applying in Spain but have worked previously in the UK, you will need to indicate those periods worked in the UK. The relevant authority in Spain will then liase with the competent authority in the UK to establish exactly what pension rights have accrued in that country.

How are the Pensions calculated?

Following the previous example, once the Spanish authorities have contacted the competent UK authorities providing all relevant documents, each country will then procede to carry out a calculation based on the following 2 criteria:

• According to the National Rules: Each country will calculate your pension in accordance solely with the contributions made in that country and in sole application of that country's laws regarding such matters.
• By Totalling and Prorating: Each country will calculate your pension on the basis of the total contributions made in both countries and establishing what monthly pension would pertain if these contributions had been made if they had just been made in that country. From this amount, each country would then establish a prorated amount based on the proportion of the contributions corresponding to that country. The following provides a simple example of how that would work in practice:

For a person who has worked 10 years in Spain and 30 years in the UK. Spain will calculate the corresponding pension as if the person had worked the full 40 years in Spain. If, for example, this amounted to a monthly payment of 1,000€, the Spanish authorities will then prorate this based on the proportion worked in Spain (i.e. 10 years or 1/4) which would amount to a pension fo 250€ a month.

At the same time, the UK authorities will carry out an equivalent calculation so if on totalling the amount works out at 100 pounds sterling a week, then you would have the right to 3/4 of that or 75 pounds sterling.

Once both countries have carried out these calculation, based on both criteria they will then procede to apply the higher amount.

How are the Pensions Paid?

Each country will pay the corresponding amount in their own currency. Following the previous example, the pensioner will receive a pension in euros in Spain and another one in pounds sterling in the UK. The pensioner can also opt to receive his or her pension either in Spain or the UK.