The decisive income data for pension purposes for the self-employed is the assessment basis, i.e. the amount from which social insurance is calculated in individual years. For the year 2023, the assessment basis is half of the gross profit. For pension purposes, the self-employed are not determined by annual income or annual profit, but by the assessment base, which is considerably lower. This is the main reason why some self-employed people expect a higher retirement pension than they are granted.
Comparison of minimum deposits
When performing the main self-employed activity, the annual social insurance must always be calculated at least from the minimum assessment base and at least minimum monthly advances must be paid during the year. In 2023, the minimum monthly advance is 2,944 crowns, but for 2024, the minimum monthly advance increases to 3,852 crowns.
The social insurance rate is 29.2 percent, therefore the minimum deposit in 2023 in the amount of 2,944 crowns corresponds to the monthly assessment base in the amount of 10,081 crowns.
Effect of increased advance on pension
In the table below, for comparison, we calculate the retirement pension of self-employed persons who have a personal assessment basis for all years of service corresponding to the payments of minimum monthly advances in 2023 and 2024, e.g. a monthly advance of 2,944 crowns corresponds to a personal assessment basis of 10,081 crowns. The calculation is carried out according to the calculation formula of the year 2024 for different periods of insurance, which also play a large role in the calculation of the old-age pension. Children’s tuition is not included.
|Insurance period||Pension amount||the difference in the amount of the pension|
|monthly deposit of 2,944 crowns||monthly deposit of 3,852 crowns|
|37 years old||9,995 crowns||11,722 crowns||1,727 crowns|
|39 years old||10,298 crowns||12,117 crowns||1,819 crowns|
|41 years old||10,600 crowns||12,513 crowns||1,913 crowns|
|43 years old||10,903 crowns||12,909 crowns||2,006 crowns|
|45 years||11,205 crowns||13,304 crowns||2,099 crowns|
|47 years old||11,508 crowns||13,700 crowns||2,192 crowns|
If the personal assessment base for all evaluated years (i.e. 1986 to 2023) corresponded to the new minimum deposit, then the monthly old-age pension would be 2,099 crowns higher when the insurance period is 45 years, compared to the personal assessment base of 10 081 crowns, which corresponds to a minimum monthly deposit of 2,944 crowns in 2023.
As can be clearly seen from the table above, the higher the insurance period obtained, the higher the financial difference. In addition, each year insurance affects pensions more with higher discretionary incomes.
Early retirement is out of the question
Self-employed persons paying only minimal advances throughout their productive life have very low regular old-age pensions. Without sufficient financial security of their own, they cannot afford to take a permanently reduced early retirement, and gainful employment until they reach the proper retirement age is essentially a necessity for them.