The new pension reform is still pending approval, although the Government has already advanced some of the measures that may come into force soon.
The objective of the different changes that are going to take place in the system is ensure its sustainabilityespecially in view of the retirements of the baby boom.
The truth is that there are already some measures of the pension reform in operation, for example, that pensions are linked to the CPI or the Intergenerational Equity Mechanism (MEI), which serves to distribute the cost of pensions among different generations of workers.
But these are not the only novelties to take into account. A change in the calculation of pensions may come into effect in the coming weeks, that will affect the amount you will receive when you retire.
This modification means that, when you go to retire, you will have to choose between the last 25 years of contributions or the last 29, being able to deduct from these the 2 worst of your career.
What is the best formula to make your pension as high as possible? Next, it is explained how the new pension calculation will be and which way you should choose to collect more.
How the pension will be calculated after the reform
To calculate the pension that you will receive in your retirement, Social Security takes into account the regulatory base of your last contribution periods.
“The regulatory base is the amount used to determine the contributory benefits of the Social Security system, that is, it is one of the factors used to calculate the amount of your pension and is calculated based on the applicant’s contribution bases“, explains Social Security.
Once the reform is approved, you must choose between 3 options to calculate the regulatory base:
- Last 25 years listed: Social Security chooses the last 300 months of the contribution base and divides them by 350, since the contribution bases are annual and are spread over 12 months.
- Last 29 years listed: Social Security takes the last 348 months and divides them by 406.
- Last 29 years of contributions, removing the 2 worst: Social Security keeps the 324 months with the best contributions and divides by 378.
The novelty is found in this last point: workers will be able to choose the option of discarding the worst years of retirement, something that could not be done until now and that will surely raise some questions.
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The best formula to increase your pension
Taking into account this change in the calculation of pensions, it is normal to ask yourself about the best formula when it comes to retiring.
There is no exact answer, it all depends on how your professional career has been and what you have quoted, as they say from Job News.
In the event that you have been earning more throughout your career and have had a stable position, It is best that you stay with the 25-year optionsince at age 29 the periods in which you have received less will be included in the calculation.
On the contrary, if you have suffered ups and downs in your career, especially in recent times, The best thing is to choose the 29 years and discard the 2 worstsince you can remove periods in which you have had part-time jobs or have been collecting unemployment.
Review your career and choose the option that best suits you, so you can increase the pension you receive.