Changes to social security contributions for the self-employed: plan your financial future

    Wednesday, 18 December, 2013

    From 1 January 2014, the maximum contribution base will be €3,597/month and the minimum will be €875.70/month. Self-employed workers under 47 on that date can choose a base between those two limits. Those who are 47 years old will also have the same choice if their contribution base was more than €1,888.80/month in December 2013.

    Self-employed people who are 47 years old on 1 January but who have a contribution base under €1,888.80/month will not be able to choose a base higher than €1,926.60 (the previous upper limit plus 2%). An exception is made for the surviving spouse of the owner of a business who has died. They will be able to choose a higher contribution base even if they are already 47.

    Self-employed people who are 48 or older on 1 January, must choose a contribution base between €944.40 and €1,926.60/month. Again, there is an exception for the surviving spouse of a business owner who has died. An exception is also made for people 45 or older and people who have only recently become self-employed.

    Self-employed people receive an average pension of €603.76/month when they retire. That is almost €350 less than people in the general system receive. Pensions for the self-employed are 38% lower than if they had been in the general system and 31% less than the average for the social security system as a whole.

    Furthermore the forecasted decline in Spains population makes the situation worse: Between 2013 and 2050 the Spanish Statistics Institute forecasts that deaths will exceed births by 2017 and expect for 2050 that there will only be one worker for each pensioner, supposing there is full employment. So state pensions will clearly have to be cut very significantly in the future.

    To assure yourself of a comfortable retirement it is a good idea to make provision for the future by getting in the habit of regular saving. A Regular Savings Plan lets you invest an amount of money each month and then, over a long period of time, those savings will increase with interest. You also benefit from a guaranteed return and can withdraw money before you retire if you need to.

    Another solution to protect your future is the Administrators Plan, savings insurance for company administrators and shareholders who have effective control of the company. This plan has appealing tax benefits and ensures you have funds available for when you choose to retire.

    If you are self-employed and want to take control of your financial future, contact us and we will advise you on how to retire with peace-of-mind and as comfortably as possible.

     

    (Sources: 5 Días, El Economista, UPTA, América Economía, Intereconomía)

     

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