The calculation of the retirement pension will change again in 2027. Workers who access retirement will be able to benefit from a dual system whereby Social Security will compare two formulas to determine the regulatory base and will apply automatically the one that is most favorable for the future pensioner.
The reform aims to adapt the system to increasingly less linear career paths, in which periods of unemployment, salary reductions, or years with particularly low contributions at the end of professional life may occur. The main novelty consists of progressively extending the period that is analyzed and allowing the exclusion of certain detrimental contribution bases.
However, there is an important nuance. Although the reform is usually summarized as the possibility of choosing between the last 25 years or the best 27 within the last 29, that second formula will not be fully operational in 2027. Its implementation began in 2026 and will advance gradually until 2037.
First formula: the last 25 years contributed
The first method maintains the system used in recent years. To calculate the regulatory base, the contribution bases corresponding to the 300 months immediately prior to retirement, that is, the last 25 years are taken into account.
The sum of those bases is divided by 350 to obtain the regulatory base on which the corresponding percentage is subsequently applied based on the years contributed and, when applicable, other coefficients related to the retirement modality.
This option may particularly favor those who have developed a stable or upward career, with high salaries and contributions during the last years prior to retirement.
A worker who has progressively improved their income and has their best bases precisely at the end of their professional life may achieve a better result with this formula, as it avoids introducing older and possibly lower contributions.
Second formula: 304 months within the last 308
The second option is the one that changes in 2027. From January 1 of that year, Social Security will be able to calculate the regulatory base by taking the 304 contribution bases of highest amount included within the 308 months immediately prior to the month before retirement.
That is to say, a period of 25 years and eight months will be observed, but the four monthly payments with lower bases can be eliminated. The sum of the 304 selected bases will be divided by 354.67.
This represents an advance compared to 2026, when the new system uses the 302 best bases within a period of 304 months and allows, therefore, to discard only two monthly payments.
The final objective: to discard the two worst years
The system will continue to expand progressively over the next decade. The reform establishes as a final destination to analyze 29 years of contributions and select the best 27, which will allow excluding 24 months with lower bases.
This model will be fully applied starting from 2037. At that time, 348 monthly payments —29 years— will be analyzed and the 324 best —27 years— will be selected.
Until then, each year will progressively incorporate additional months into the calculation period and also increase the number of monthly payments that can be excluded.
Who benefits from the new formula?
The reform is especially designed for workers with irregular work careers. A person may have contributed for decades with good bases and suffer, shortly before retiring, a dismissal, a salary reduction, or a period of lower-paid employment.
With the traditional formula, those last years of low contributions necessarily enter into the calculation because the 25 immediately preceding years are used. The new model allows looking a bit further back and progressively eliminating the least favorable bases.
It may also be useful for people who have gone through periods of unemployment or interruptions in their professional career, although the result will depend on the specific contributions accumulated during the entire period that enters into the calculation.
And who can benefit more from the last 25 years?
Not all workers will obtain a higher pension using the new system. Those who have experienced a sustained salary improvement during the last part of their career may still find it more advantageous to calculate retirement solely with the previous 25 years.
For example, if the contributions from 26 or 27 years ago were considerably lower than the current ones and the worker does not present large periods of low contributions in the last years, extending the analyzed period may not provide any advantage.
Precisely for this reason, the dual system is temporarily maintained: the retiree will not have to guess which method suits them or choose it on their own.
The Social Security will automatically choose the most favorable option
This is probably the most important aspect for those retiring in 2027. The regulation establishes that, for retirements occurring from 2026 to 2040, the managing entity must compare the two alternatives and apply the one that generates a higher regulatory base.
Therefore, the worker does not have to submit two applications nor previously renounce one of the methods. The Social Security will carry out the corresponding calculations at the time of recognizing the pension.
In 2027, in simplified terms, the comparison will be this:
Traditional formula: the contribution bases of the last 300 months —25 years—, divided by 350.
New formula of 2027: the 304 best bases of the last 308 months, discarding the four lowest and dividing the result by 354.67.
It does not mean that "the worst years" are automatically eliminated in 2027
One of the main mistakes in explaining the reform is to claim that from 2027 it will be possible to eliminate two complete years of bad contributions. It will not be like that.
The possibility of excluding 24 monthly payments will come when the progressive rollout of the new model ends. In 2027, only four monthly payments from the 308 analyzed will be able to be excluded. Each subsequent year will gradually expand that margin until reaching the definitive scheme.
The purpose of the reform does remain intact: to better protect those who suffer labor ups and downs at the end of their career without harming those who obtain a higher pension with the previous system.
Thus, retiring in 2027 will mean having two possible calculations and a fundamental guarantee: the Social Security must keep the most favorable one. For workers with stable and growing careers, they can continue to earn the last 25 years; for those who have suffered months of particularly low contributions, the new formula begins to offer from 2027 a first advantage by allowing them to be excluded from the calculation.