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Why Spain’s self-employed are set to receive much better pensions

One of the benefits of the recently announced tax hike for self-employed workers in Spain is that they will finally receive the same monthly pension as contracted employees.

Published: 24 February 2021 13:25 CET
Why Spain's self-employed are set to receive much better pensions
Photo: Alexas Photo/Pixabay

Spain’s self-employed have a pretty tough gig.

We’ve covered it in detail before in the link below, but the challenges include everything from the highest flat self-employed fee in the EU to plenty of convoluted bureaucracy.

Self-employed in Spain: What you should know about being 'autónomo'

Fortunately, one of the main downsides of being autónomo in Spain is now set to be resolved as a result of the government’s recent changes to the contributions for this group of workers.

In return for paying €144.49 more a month to Spain’s social security system on their net income, they will receive €377.92 more per month in their future pensions.

But it does mean that if they contribute (cotizar) on their net earnings, many will go from paying €288.99 a month to €433.48.

The threshold to calculate this are earnings of €1,416.60 a month, which is 1.5 times the current minimum contribution base.

Spain’s social security ministry will adjust the new way of calculating contributions based on self-employed worker’s net earnings (ingresos reales), so some will pay less but most will contribute more.

This means that autónomos will overall pay 50 percent more than they currently do to RETA (Spain’s Special Regime for self-employed workers), adding €5 billion more to public coffers every year.

In 2019, retired self-employed people in Spain received an average €686 monthly pension whereas the average for retirees who were on the payroll was €1,091.

The numbers fluctuate year to year but in general the gap between both groups has been widening.

The argument by Spain's version of Inland Revenue up until now has been that 86 percent of autónomos in Spain pay the minimum monthly social security contributions during their working life.

Even the OECD has had to step in to warn the Spanish government that as things stand, there will be an army of old people in twenty years' time struggling to make ends meet.

The new autónomo rules, which are yet to be written in law, are expected to come into force in 2022.

Although these latest measures may offer some sense of security for the future for many self-employed workers in Spain, others may find it a hard pill to swallow given that their earnings have dropped considerably during the pandemic and that they still have to pay a flat fee of €289 a month, a fee that’s high enough already for some.

READ MORE:

Autónomo: What we know about Spain's plan to change freelance contributions

 

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PENSIONS

The best private pension plans in Spain

Spain's ageing population and falling birth rate has led many people to expect that public pensions will be affected in the future. Knowing the best private pension plans available in Spain could save you some stress in the long-term.

Published: 4 April 2024 10:28 CEST
Updated: 7 April 2024 12:18 CEST
The best private pension plans in Spain

Spaniards don’t tend to invest in private pensions. Estimates suggest that just 16.4 percent of them have at least some of their retirement savings deposited in private plans, meaning that the vast majority of payouts come from the public coffers.

In fact, OECD data on pension plans shows that the weight (in terms of GDP) allocated to private pensions products in Spain is seven times lower than the OECD average.

Spain’s total private assets amount to just 14.3 percent of GDP, a far cry from the OECD average, which is slightly above 105 percent, and Spain ranked 25th out of 38 countries in one OECD report.

This has led many to worry that Spain’s public pensions could be at risk in the medium-term future.

You can read more of The Local’s coverage of the uncertainty of Spain’s public pension system below, but in short the reasoning is that long-term demographic change, slowing birth rates among Spaniards, plus the looming prospect of a larger than usual cohort of baby boomer retirees and the types of pensions they usually claim mean that, if Spain is to avoid pensions payouts swallowing up more and more of its economy, then changes will be needed — sooner rather than later.

READ ALSO: Will there be no public pensions in Spain in the future?

As such, for fear of there not being a public pension for them in the future, many younger people in Spain may now be considering private plans. And owing to the fact that the vast majority of Spaniards opt for public pensions, private pensions often get overlooked.

Here are some of the best available in 2024

Best variable income pension plans in 2024

A variable income plan is essentially one in which the payout fluctuates depending on how well the plan’s investments (ie. where your pension money is actually invested) perform over time.

Here’s a list of the best variable pension plans in 2024, ranked by annual performance:

Azvalor Global Value PP: 47.40 (percent)
Cobas Global PP: 9.73
Magallanes European Equities PP: 5.39
Horos International PP: 5.22
Ontinyent Magallanes PP: 4.84
Caser Magallanes: 4.78
Caser Gestión de Valor PP: 4.78
SA Nostra Magallanes Equity PP: 4.57
Santander ASG Acciones España: 3.57 percent
Santander ASG Equities Spain: 3.82
Dunas Selección Europe F&F: 3.38

Best mixed pension plans for 2024

Mixed pensions plans are generally when the investment in variable income products may not exceed a third or 30 percent, depending on the bank or entity, and the remainder of the pot is fixed.

Azvalor Consolidation: Annual return: 15.98 percent, 3 year return: 8.03 percent
Cobas Mixto Global: Annual return: 6.94, 3 year return: 3.12 percent
Feelcapital 50: Annual return: 3.07, 3 year return: 2.93
Dunas Valor Flexible F&F: Annual return: 2.84 percent, 3 year return: 3.67 percent
Dunas Flexible Value 2: Annual return: 2.18, 3 year return: 2.98 percent
Dunas Balance Value F&F: Annual return: 2.02 percent, 3 year return: 2.11
Atl Capital Conservador: Annual return: 1.71 percent, 3 year return: 1.89 percent
PP Ind. Gesnorte: Annual return: 1.46 percent, 3 year return: 1.55 percent

READ ALSO: How many years do I have to work in Spain to get a pension?

Long-term returns

Obviously, pension plans are long-term investments, especially if you’re young and thinking ahead. A pension plan that performs well in one year doesn’t necessarily mean it will perform as well later on down the line.

Therefore, you should also think about long-term performance when choosing a pension plan. Below is a list of the best variable income pension plans in Spain according to their three-year annualised returns:

Azvalor Global Value PP: 23.53 percent
Magallanes European Equities PP: 15.53
Horos International PP: 12.39
BK International Variable PP: 9.93
Merchbanc Global PP: 9.56
BBVA Telecomunicaciones PP: 8.93
Ibercaja Pensiones Bolsa USA: 8.93
CNP Partners Activo: 8.80
CNP Partners Assets: 8.16
Santander ASG American: 8.10
Orange S&P 500 PP: 7.50

READ ALSO: The best high-yield savings accounts in Spain

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