The social protection of the self-employed
The social protection of the self-employed continues to be an important factor of inequality compared to employed workers.
Social contributions are the economic support base of the Social Security system paid by all workers, giving them the right to cover the possible contingencies that may befall any citizen.
While in the case of employees, the contribution base depends on the salary they receive, in the case of the self-employed, the base of their contribution is eligible, starting from a minimum established for 2019 at €994.40. From that figure, each self-employed worker can set the base that he prefers (limiting the maximum according to age), for which he will have to pay the 30% that is paid to the State as a contribution.
76% of the self-employed contribute the minimum of the Special Scheme for Self-Employed Workers (RETA)
The tables published by Social Security for 2019 establish the minimum contribution base at €944.40/month and the maximum at €4,070.10/month. From these two figures, workers can choose the amount they wish to pay and contribute 30% of the chosen base.
That 30% is distributed as follows:
As has already been indicated, the system is established on the voluntary basis of the contributors, so it is perfectly legal for them to choose the minimum base regardless of their billing volume.
In July 2019, and according to Social Security data, the average self-employed pension does not reach 700 euros, remaining at 686 euros.
For this reason, mechanisms have been established to promote and advance in the increase in the minimum contribution bases in order to ensure that the self-employed do not reach the age of 67 with a clearly insufficient pension, establishing for 2019:
- In general, for those over 47, the minimum base is raised to €1,018.50/month.
- For those who, over the age of 50, are self-employed or have had more than ten registered workers, a minimum contribution base of €1,214.10/month is established
Even so, the retirement pension will continue to be less than what is necessary to live without problems.
What is achieved is that the self-employed contribute more to the Social Security coffers from now on, helping to reduce a deficit that increases year after year as the population ages and new contributors are not able to support the increasingly numerous retired.
What reasons lead the self-employed to contribute to the minimum base?
According to the ATA report “The self-employed in the face of social security,” when asked whether or not they would be willing to change their contribution base if social benefits improved, we find that more than 50% would not do so.
The lack of sufficient income will condition the pensions of almost 40% of the self-employed and distrust in the system of another 13%.
What are the self-employed contributions based on age?
When choosing their contribution base, the youngest self-employed contribute for the minimum base, and this should increase with age; however, reality tells us that more than 40% of the self-employed over 55 years of age continue to contribute for the minimum basis.
Another of the keys that the study gives us is the general ignorance of the self-employed in terms of the social benefits generated by their monthly Social Security contribution.
A large majority say they do not have enough knowledge; that is, they are poorly informed about the benefits covered by their contributions.
Upload the base or opt for a private plane?
No one doubts that an adjustment to current public pensions is necessary, as it is a right for all citizens; it is essential to make them sustainable so that they reach the entire population in the future.
The debate focuses on the sustainability of the system in an increasingly aging society with a reduced active population, and that must keep the system running.
Faced with such a common doubt on the part of the self-employed, such as the choice between raising their contribution base or contracting a private Savings Insurance, there is no magic formula; It will depend on the age of the contributor, his working life, and the amount he can spend each month to consolidate capital for his retirement.
Let’s keep in mind that:
- As of 2022, the last 25 years will be taken as a reference to determine the regulatory base for retirement.
- The introduction of the sustainability factor, despite being suspended, will come into force with the consequent reducing effect on the number of public pensions.
- The maximum contribution base in 2019 is €4,070, while the maximum pension is €2,649.91: In other words, it can be seen that there is a deficit between the maximum that can be contributed and the maximum that can be received, being the contribution base higher than the top of the retirement base.
- The pay-as-you-go system on which Social Security is based will require future adjustments that will negatively affect future pensions to make it sustainable, especially for young people.
In one direction or another, the decision will require specialized and professional advice to find the best combination between both systems to optimize performance.
Based on the capitalization system, universal life Insurance assures us of guaranteed retirement capital and family pension coverage, with various taxation options that are especially interesting for the self-employed.