It is no surprise: the self-employed receive a retirement pension on average much lower than that of the salaried worker or employee. The reason? We have already mentioned it on previous occasions: although they may receive similar salaries, the contribution is usually at the minimum and this means that the self-employed’s rights are much lower.
Why is the self-employed person’s pension usually lower?
As we have already pointed out, the self-employed or freelance worker is free to set the contribution base he/she wishes. This means that even if he usually earns, for example, about 3,000 euros per month, if he wants, he can contribute 1,000 euros to the Social Security. With this, you get to pay less quota, but the rights also take as a basis that amount, and not the actual salary.
The data are compelling:
- Approximately 80% of self-employed workers pay contributions at the minimum rate.
- The average difference in the retirement pension, according to data from the Ministry of Employment, is around 463 euros less per month for the self-employed.
These are the main reasons why the self-employed usually take out sick leave insurance and savings products (pension plans or other assets) to supplement their public benefits, which are often more than insufficient.
How can I, as a self-employed person, improve my retirement pension?
Many experts speak on this subject, and the opinion is not unique, so let’s leave ours.
It is a fact that the Spanish pension system is a pay-as-you-go system. This means that even if we contribute to the system throughout our working life, for example, 50,000 euros for certain benefits, it does not mean that we will receive that money later, since it is distributed among the current pensioners, and when the time comes for me to retire, we will see what I will receive.
This is completely different from a capitalization system, which does exist in other European countries. Through this, if I contribute 500 euros a month, when I retire I will receive those 500 euros plus the profitability obtained over time.
Tips to improve our pension
For the self-employed who have the capacity to save, the ideal is to contribute at the minimum rate, and to encourage private savings from which I can know how much pension I will have left when I retire.
If the minimum self-employed contribution is currently set at 275 euros, and the maximum at approximately 1,100 euros, there is a monthly difference of more than 800 euros, which we could allocate to private savings. Annualized, that is about 10,000 euros per year.
On the other hand, we have already announced in previous posts all the corrective and control measures for pensions, in order to make the system sustainable. Undoubtedly, the biggest cut is, and will continue to be, in the maximum pension.
Don’t hesitate and start considering what you want your retirement pension to be. The sooner you start working on it, the more profitability you will be able to accumulate to enjoy a comfortable retirement. Trust in our Savings and Investment Department to receive this advice and enjoy the best products in the Spanish market.
