What is the difference between Pension and Retirement?

A person who has dedicated his life to work deserves to be rewarded for it, to ensure that during his old age, he can remain part of the fruit of his labor for years. This is where concepts such as pension and retirement come in, which although they are often confused with each other, each one represents a form of support that benefits the adult of retirement age.

Difference between Pension and Retirement in tabular form

What is a Retirement?

The word retirement comes from Latin, which means to express oneself with joy, however in today’s society the term retirement is used to refer to the individual who has fulfilled the maximum time established to perform a job in a company or organization, or those who have reached an old age at which they must retire from work due to old age.

If we relate joy to the cessation of work activity, then it should mean that the worker would start to enjoy the fruit of the work carried out throughout his life. Then, retirement becomes a stage in which a person who has been active must go into rest or be given the freedom to dedicate himself to exercising in other areas, once the time in which he worked has expired.

These people who reach retirement, in accordance with the laws of the State in each country, are assigned a monthly pension so that they can ensure the satisfaction of their basic needs.

There are cases, in which private companies or unions, grant an extra monetary benefit in return for the years of dedication in an organization, to provide the opportunity for people to start this new stage of their lives with joy of duty fulfilled and New goals or personal projects can be set.

Types of retirement

The current legislation contemplates, according to the attached table, different types of retirement , and each one contemplates certain requirements of age, deficiency ( minimum contribution ), employment status and other requirements:

• There is ordinary retirement , for which one can retire from the age of 65 or 67 depending on the time quoted (minimum 15 years).
• Early retirement , by mutual, voluntary, involuntary (in case of business restructuring), due to certain disabilities (greater than 45%), due to the application of age-reducing coefficients (in the case of miners, firefighters or sea workers , among others) or by reason of the activity performed (applies to artists and bullfighters).
• Partial retirement, initiated after reaching the age of 60, simultaneously with a part-time work contract and linked or not with a relief contract entered into with an unemployed worker or who has a fixed-term contract with the company .
• Retirement for old age – SOVI , for those who worked before 1967 and are not entitled to another type of pension.

What is a Pension?

The pension is an economic contribution received monthly upon retirement by those who participated in the Mandatory Pension fund during their working life, from their relationship as dependent or independent workers.

In general, the cause of termination of employment is old age, reaching the age established by the laws of each country, to enjoy this benefit or to cover with the amount of contributions required to accumulate in the pension fund. But it is also the case that the pension is granted to those who for some reason suffer from incapacity for work or the survivor’s pension, which is granted to family members if the worker dies.

The pension is considered a human right and it is that way it is contemplated in the Universal Declaration of Human Rights, elaborated in the year 1948 in which it is expressed that every individual has the right to a standard of living that provides health and well-being in all. senses, also emphasizes the mandatory right to have insurance in case of old age, unemployment, widowhood, illness or disability.

Each State establishes an organization in charge of managing this pension fund, which is usually related to Social Security or Social Security, so that with the provision of the pension it seeks to guarantee that all citizens of a country have the economic conditions to achieve meet your basic needs.

The way a pension fund works is through a monthly contribution made by the active worker as an employee, as well as the institution or company that employs him, if we talk about a dependency relationship. And it is that the State establishes that the monthly contribution is made according to the salary received by the employee and corresponds to 16% of the salary, however the worker only covers 4%, while the company contributes the remaining 12%.

If we find ourselves with an independent worker, in order to be able to contribute to the pension system, they must pay the entire percentage required in relation to the average income they receive. It should be noted that this varies according to the policies established in each region.

Types of pension

Therefore, there are different types of pension, according to different assumptions that we are going to analyze.

• Retirement pension  (ordinary, partial, flexible, anticipated for having the condition of mutualist or anticipated without having the condition of mutualist): the amount of the pension is determined by the regulatory base and the percentage that is applied to it based on the listed years. The management and recognition of the right to a retirement pension corresponds to the National Institute of Social Security, except for workers included in the special regime of the sea that corresponds to the Social Institute of the Navy.
• Partial permanent disability pension for the usual profession : causes the worker a decrease of not less than 33% in performance for said profession.
• Total permanent disability pension : it disables the worker for his usual profession but he can dedicate himself to a different one. The corresponding life pension will be compatible with the salary that the worker may receive in the same company or in a different one, as long as the functions do not coincide with those that gave rise to total permanent disability.
• Absolute permanent disability pension : disables the worker for any profession or trade. However, the pension will not prevent the exercise of those activities, whether lucrative or not, compatible with the state of the invalid and that do not represent a change in their ability to work for review purposes.
• Severe disability pension : when the permanently disabled worker needs the assistance of another person for the most essential acts of life. The pension will consist of the amount of the pension that corresponds to permanent disability (total or absolute), increased with a supplement.
• Widow’s pension: pension that compensates for the situation of economic need that produces, for certain people, the death of others.
• Orphan’s pension : the objective is to protect the situation of economic need caused by the death of the person who originates the benefit. It is a pension granted to the children of the deceased person and under certain circumstances, to the surviving spouse.
• Pension in favor of relatives : the beneficiaries are the following relatives who, having lived with and depended economically on the deceased at least 2 years before the date of death, are not entitled to another public pension, lack means of subsistence and prove the established requirements. These are grandchildren and siblings; mother and grandmothers; father and grandparents and children and siblings of retirement or permanent disability pensioners
• Contributory pensions : their concession is generally subject to accrediting a minimum period of contribution to Social Security in addition to meeting other requirements.
• Non-contributory pensions : designed for those citizens who lack sufficient resources, even if they have never contributed long enough to achieve the benefits of the contributory level.

Difference between Retirement and Pension

• The pension is a monthly economic contribution granted by the State once the requirements established by the Law have been met, while retirement is the culmination of the work stage in a person’s life.
• Retirement is granted upon completion of a set time or upon reaching a certain age working in a company, on the other hand, the pension is provided from the age established by the State to cease work activity.
• The pension is managed by the State agency in charge of managing Social Security. For its part, retirement can be managed by the public or private entity or the unions.
• A person can be a pensioner but not retired, however a retired individual can enjoy their pension.
• The pension is granted for old age, widowhood, incapacity or orphanhood, whereas retirement is given by the completion of the work stage in whole or in part.