The retirement pension of the self-employed in Spain is 40% lower on average than that of self-employed workers. The reason for this difference lies in how the calculation is carried out, on the one hand, and in the self-employed contribution system, on the other.
The upcoming changes in the calculation of retirement and, above all, the new contribution system for the self-employed based on their real income should help balance the balance and reduce these differences. To understand why, you have to know where the self-employed pension is sold from and how it is calculated.
When can the self-employed retire?
Before reaching the pension, you have to know when you can retire. The legal retirement age in Spain is set at 66 years and four months for those who have contributed less than 37 years and three months, a figure that will rise until reaching 67 years of age in 2027.
Ordinary retirement can also be reached at age 65, but only when you have worked for more than 37 years.
In addition, self-employed workers can request voluntary early retirement up to two years before the legal age. That is, you can retire at 64 years of age. Of course, doing so will mean giving up part of your pension. The amount of pension you lose by retiring at age 64 or retiring early at age 65 will depend on how long you have contributed and how long you advance your retirement.
And the thing is, Social Security applies a series of reducing coefficients on the pension that range from 21% to 2.81%.
How many years do you have to contribute?
To access the contributory pension it is necessary to have contributed for a minimum of 15 years. Those who do not reach that figure may request a non-contributory pension.
How to calculate the self-employed pension in two steps
Now that you know how much and the consequences of bringing your retirement forward, you will discover how much and how to calculate your pension as a self-employed worker.
The process is the same as for an employee and can be divided into three steps. Don’t be scared by the terminology as a regulatory basis, because the calculation is simpler than it seems.
Find out your regulatory base
The regulatory base is the data on which the pension will later be calculated. You can charge it in full or just a percentage of it.
To calculate the regulatory base of the pension, you must add the last 300 months of contributions and divide it by 350.
Starting in 2024, the pension reform changes will also vary the formula slightly. On the one hand, starting in 2024, the number of years taken into account will increase at a rate of six months per year until reaching 29 years in 2044.
On the other hand, Social Security will choose between the formula it has seen and the last 29 years minus the two worst years. Starting in 2044, the second option will be the one applied by default.
Apply the regulatory percentage
The regulatory basis is not the pension you will collect. A series of percentages are applied to that amount based on the time quoted.
Only if you have worked for more than 36 years and 7 months will you be able to collect 100% of the pension. If you do not reach the figure, you will have to settle for a percentage of the regulatory base.
The percentage of the contributory pension as a self-employed person starts at 50%. To access it it is necessary to add 15 years of contributions. From there, each additional year of contributions will add an extra percentage until reaching 100%.
This percentage does not add up uniformly. The first additional 49 months or 4.08 years add up to a higher percentage than the following. For each month up to that figure you will add 0.21 percentage points to the pension up to 10.29% more.
The rest up to 36 years and three months will add 0.19 points.
For example, the retirement pension with 20 years of contributions will be 64.28%. This percentage increases with 25 years of contributions and also with 35 years of contributions.
As with retirement age, this shape changes over time. The following table summarizes what the evolution will be:
Complement to minimums
What happens if after doing the calculation the pension is very low? In the case of self-employed people with a contributory pension, if the retirement pension does not reach the minimum, they may request a minimum supplement of up to 400 euros.
For their part, those who do not have 15 years of contributions will have to settle for the non-contributory pension, which has a welfare nature and is much lower than the contributory one.
