As a self-employed person, what will be the amount of my pension?

Now that many baby boomers are reaching the age of retirement, more and more people are wondering about their future pension. How can an increasingly smaller number of people in employment produce enough wealth for the pensions of a growing non-working population, or – more precisely – a population no longer in employment?

Three factors

The amount that a person receives as a statutory pension depends overall on three main factors. Firstly, the length of the person's career: the longer a person works, the bigger the pension he or she will receive. This makes perfect sense. Secondly, how much a person earns: the more money earned during a person's career – i.e. the more a person contributes to the system – the more a person will receive in return. This also makes sense. The third factor, however, points to the inequality of the system: the amount of the statutory pension also depends on the status of the worker. It is much more advantageous to have worked as a civil servant than as a private sector employee, and these two statuses are much more attractive than that of a self-employed person. 

For self-employed people

It is therefore not easy to make a comparison between the pensions of people in different sectors, nor is it easy – due to the first two factors – to provide an exact figure for the 'average' pension of a self-employed person. However, there has been a significant improvement in the pensions of self-employed people in recent years. Since the end of 2014, the minimum pension for a self-employed person (single pensioner) has increased by €150 per month and, since September 2017, amounts to €1,212.45. However, this is only the case for those who have had a full career of 45 years. Those who have not had a full career will therefore have a (much) smaller pension. Even among self-employed people, there are big differences due to the first two abovementioned factors: often, women – even with the status of self-employed person – earn less than men and, very often, have a shorter career.  

What is the solution?

A self-employed person can therefore only rely on him/herself for a liveable retirement. As he or she cannot count on the first pillar of the pension system, he or she can – or must – count on the three other pillars. The second pillar, the supplementary pension, includes all of the extra-legal pension regulations in connection with the professional activity. The payments towards this pension benefit from an advantageous tax treatment. For example, employees benefit from group insurance. For self-employed people, there is the Private Supplementary Pension for the Self-employed (PSPS), and for self-employed business owners, there is the individual pension agreement (IPA). Now there is also a Pension Commitment for the Self-employed (PCS). This allows self-employed people who are not business owners and who are therefore not entitled to an individual pension agreement (IPA) to contribute to this type of plan, in addition to a classic PSPS.  

The third pillar can also be worthwhile for self-employed people, i.e. pension savings and life insurance. These two types of savings are also advantageous from a tax perspective. And let us not forget what is often referred to as the fourth pillar: personal wealth. This is particularly important for a self-employed person. This refers to personal savings and investments: savings accounts, bonds, shares, etc. But it is not necessary to go so far: simply owning a home provides a certain amount of security, for someone who will not receive a large pension. 

It is therefore clear that the situation of self-employed people leaves much to be desired. However, there are a few ways to improve it. 

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