Self-employed retirees can retain business administration and pension

Self-employed workers who, after retiring, continue to exercise a role as administrators of the company linked to their business, will not lose their right to receive the pension. This has been established by a ruling by the Social Court of Granada, which ruled in favour of a self-employed person who was in this situation and did not receive any remuneration for it.

The Judges consider that maintaining ownership of the business and performing functions inherent to it, such as issuing instructions and criteria for action to the management bodies, is not a sufficient reason for Social Security to revoke the right of retired self-employed workers to receive the benefit, as long as no economic compensation is received for it.

According to the law firm that assumed the legal defence of the self-employed worker, the main argument lies in the General Social Security Law (LGSS), which allows retired self-employed workers to make their retirement pension compatible with self-employed work, “as long as the total annual income does not exceed the Minimum Interprofessional Salary (SMI).” That is, an active retirement situation.

As they assessed, this is an issue of special relevance for retired self-employed workers, many of whom continue to be administrators or owners of their businesses after their retirement, although they no longer carry out their activity. Therefore, “it sets an important precedent and reinforces the defence of the rights of self-employed workers in similar situations,” they stated.

The ruling of the Social Court of Granada refers to a self-employed person who, after retiring and ceasing to carry out her activity, continued to appear as administrator of the company and contribute to the Special Regime for Self-Employed Workers (RETA), as required by the legislation.

Thus, the National Social Security Institute (INSS) initially considered that both situations – retirement and contribution to the RETA in its role as administrator – were not compatible, which is why it denied the right to collect the pension of the self-employed worker.

However, after a first lawsuit, the judges considered that the self-employed person could receive 50% of her benefit, in the form of active retirement. And, after an appeal filed by the INSS, Justice has finally granted her access to 100% of the pension, even despite continuing to contribute in their role as administrator.

As explained by Ismael Istambul and Álvaro Fernández, the labour lawyers from the Iberum Abogados firm who have been in charge of defending the self-employed retiree, the fundamental reason is that “although inclusion in the RETA presumes the habitual, personal and direct exercise of an activity of lucrative economy, there are exceptions. A clear example of this is this case”, in which the self-employed person did not receive any financial remuneration.

Both lawyers valued the ruling of the Social Court of Granada as “very relevant for the self-employed, especially for those who are directors of the company. It represents the materialisation of a right that self-employed workers have”. “It is a ruling in which it is said that the corporate administrator has the right to collect active retirement – for continuing to contribute to the RETA – and not only at 50%, but at 100%,” they added.

However, this is a particular situation, so not all retired self-employed workers could make their pension compatible with their contribution to the RETA if they continue to be business managers. As they explained, “we would have to go case by case,” and comply with a series of requirements.

Firstly, the impossibility of appointing another administrator other than the retired person is one of the points that the judges understood as fundamental to agree with this self-employed person.

In this case, “the administration function occurred, in the first place, by law, because this self-employed person, who owned 50% of the business, was the only person who could perform these functions. This is because the rest of the partners were civil servants and could not make this role compatible,” explained Istambul and Fernández.

The remuneration of the retired self-employed person in the business is another consideration to take into account.

Secondly, the self-employed person who won the lawsuit against Social Security did not receive any type of remuneration for her duties as business administrator, so the Court understood that she did not carry out any economic activity, despite continuing to contribute to the RETA to comply with its legal obligation. Although, “even if she had done so, it could be discussed whether or not she would lose the right to collect the retirement pension,” explained the lawyers from Iberum Abogados.

So, what would happen if the self-employed person did receive remuneration? “It should be discussed, because, with the current retirement systems, which aim to make continuing to contribute compatible with the receipt of contributions – active retirement -, it should be possible, as long as the requirements are met,” assessed Ismael Istambul and Álvaro Fernández.

Finally, the judges considered that registration in the Special Regime for Self-Employed Workers (RETA) does not always go hand in hand with the development of an economic activity that makes the collection of retirement benefits incompatible.

“When a self-employed person requests retirement, they must communicate the date on which they will stop carrying out their activity. In this case, the INSS presumed that the self-employed person had been untrue by continuing to be registered with the RETA, but the ruling says that this presumption is not real,” explained the labour lawyers.

Specifically, the Social Court of Granada argued that this communication “is simply the story of a physical fact, stopping working or managing the company. Another thing is that it owns 50% of the shares, which is why it is registered ex officio by the Treasury, but the legal provision for the purposes of inclusion in the system does not mean that it must necessarily be extrapolated to the area of ​​incompatibilities between pension and work,” he concluded.

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