Cash incentives for self-employed workers to delay retirement

The Social Security department has published a table with the expected amounts that it will pay to the self-employed if they decide to retire beyond the legal age and collect an incentive for delayed retirement. From 2022, self-employed workers can delay their pension and collect a lump sum for each year they postpone it. There is also the possibility of applying a percentage increase on the benefit that they will receive for the rest of their life.

The law that came into force in January 2022 to guarantee the purchasing power of pensions and other measures to strengthen the system established three possible incentives that self-employed workers can receive for retiring beyond the legal age. Social Security gives them the option of making a single payment, applying a percentage increase to their pension or a mixed formula between these two alternatives.

The legal age in 2023 is 65 years for self-employed workers who have been contributing for more than 38 and a half years or 66 years and four months for self-employed workers who have been contributing for less time. With delayed retirement, the self-employed can collect up to more than 12,000 euro in a single payment for each year that they delay their pension beyond this age.

According to the table published by Social Security, a self-employed person would earn between 4,400 and 12,400 euro for each year that they delay their retirement. This difference of 8,000 euro for each year that the pension is delayed is due, according to the Treasury, to two factors: the initial pension that the self-employed worker has and the years that they contributed.

Social Security explained that right now the most innovative and attractive incentive for the self-employed “is the possibility of receiving a lump sum amount per year of delay, a single payment, at the time you access retirement if you have decided to delay it”. The amount of this incentive varies depending on “the years of contributions credited at the time the date of your ordinary retirement and initial pension is reached.”

Thus, this method varies depending on whether the self-employed person has had a long contribution career (more than 44 years and 6 months) or if they have contributed below that figure.

The same self-employed person with an initial pension of 1,00 euros per month (a regulatory base of around 1,100 euro and a contribution of about 350 euro per month) would receive 6,000 euro for each year that they delayed retirement if they had less than 44 and a half years of contributions, but would receive 6,600 euro in a single payment, if they had contributed more.

Similarly, a self-employed person who had a higher pension, of 2,000 euro per year, would receive 9,600 euro in a single payment if they had contributed less than 44 and a half years and 10,100 if they had a longer contribution career.

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