european pension coordination and voluntary/overlapping contributions

Nedwillow

I’m trying to understand the regulation on social security coordination across Europe and have read some contradictory opinions.

Given that I will have a full UK pension based on my compulsory contributions (17 years) paid while working in the UK and the rest on voluntary contributions (18 years) paid while working in Spain and contributing simultaneously to Spain’s system (for 24 years), is it correct to assume that each state will at least pay a pension based on its own rules and according to contributions in that state?

 In other words, am I right in understanding that overlapping years caused by voluntary contributions don’t negatively affect your entitlement in each state, cancelling each other out in some way?

Can anyone clarify this please? Thanks

JoeCrystal

Yes. I vaguely recall that you can only use other countries' contributions to reach the minimum required years. You exceed both countries so that you may be correct in your assumption. Have you checked with the UK and Spain Pension authorities yet? Finding out your state pension should be pretty straightforward, but I have no idea how you meant to check your Spanish pensions. 

Nedwillow

Yes, I have accessed my forecasts for both countries through the respective online systems. And I did speak to someone in the UK pensions service who said one pension does not adversely affect or reduce the other. But I've read other opinions (and I assume they are just opinions) suggesting that Spain might reduce my entltlement in light of my full UK pension as they overlap. But I find that hard to believe and doesn't seem to tally with my understanding of the regulation governing this system (883/04 and No 987/09), although it is quite dense. But would like to be sure.

pinnks

The way it works is that each country does 2 calculations and pays you the higher amount as a pension - see Article 52(1)(a)&(b) EC 883/2004.

1. A pension based solely on your contribution record in their country, so the same as they would do for any domestic claim.  This is called the Independent Benefit and if you don't have the minimum years it is zero.
2. A "theoretical amount" of pension based on the assumption that all of your contribution periods were in their country but disregarding any non-domestic periods that overlap with domestic periods (aggregation).  This amount is then pro-rated based on your actual contribution period in that country.  This is called the Pro-rata Benefit.

Generally, if you do not have enough contribution periods in one country to meet minimum period requirements, like the 15 years in Spain, or their 2 in the final 15 etc, calculation 1. above will be zero and calculation 2. will be more than zero, which is how you qualify for a pension using aggregation.  However, it is possible that you qualify already under calculation 1. but calculation 2. still gives a higher amount.  This can be the case in Germany, where I know of a number of cases where the calculation under 2. gives a higher amount than that under 1. when both are greater than zero.  This is explained in the German pension authority training material as possible, even though it is somewhat counter-intuitive. But that depends on how the domestic rules work, so is not the case everywhere, e.g. not in the UK and nor, I believe, under the Spanish system.  It is, as they say, what it is.

Countries have different contribution periods under their legislation. E.g. UK NIC is a weekly charge but you need to have qualifying years for UK pension purposes.  Germany works on months and a single day in a month makes the whole month count as qualifying.  Spain will work on days/weeks/months, or whatever, and when aggregation is done by the country calculating your pension, they merge the UK weeks into whatever they use.  Given the UK year is 6 April to 5 April and many other countries look at calendar years, or simply time periods of days etc, your aggregation calculation can look pretty weird.

There are plenty of people out there, myself included, who have pensions from the UK and elsewhere under the EU regulations and I have never hear of anyone's pension being reduced - as you can see the above calculation is the higher of, so can only work in your favour.

Nedwillow

Thanks very much for explaining. That's reassuring...