An obligation for self-employed people to make provisions for old age is not necessary
IfM Bonn recommends instead better integration of existing pension insurance systems
Approx. six out of ten self-employed persons generate a profit income of less than 10,000 euros per year. Their profits thus remain below the basic tax-free allowance and are not sufficient to build up an adequate pension plan. In the last days, the Federal Ministry of Labour and Social Affairs has therefore given concrete form to its plans to introduce an obligatory retirement provision for all self-employed persons.
However, the researchers at the IfM Bonn do not consider this as necessary: Even if many self-employed persons only had a low income from profits at the moment, it could not necessarily be concluded that they would not be able to build up sufficient pension provision for themselves in the long term. In fact, periods with low income would often be compensated by periods with higher income.
„Moreover, 40% of all self-employed people we studied had earned gross wages from dependent employment in addition to their income from self-employment. For this part of their income, they are obliged to take out pension insurance. A third group of self-employed people are taxed together with a partner and thus have additional income,“ reports Hans-Jürgen Wolter, head of the IfM study „The income situation of the self-employed and their capability of retirement provision“.
Nevertheless, some self-employed people find themselves in precarious financial circumstances over a longer period of time. However, this group was relatively small, according to the analysis done by the IfM researchers. Besides, in their view, it is questionable whether these self-employed people would even have the financial resources to fulfil their obligation to provide for old age.
In addition, the introduction of such a pension obligation would involve considerable administrative problems. In Germany, for example, there is no proper register for self-employed persons. If the data from the income tax survey were to be used, the problem of defining the self-employed groups properly would arise: due to the increasing spread of hybrid forms of employment, it is difficult to distinguish between primary income on the one hand and additional (secondary) income on the other. The IfM researchers, therefore, recommend that existing pension insurance systems should be interlinked better. This would facilitate the build-up and transfer of old-age provision in the case of hybrid or changing employment models.
The study „The income situation of the self-employed and their capability of retirement provision“ is available on the homepage of the Institut für Mittelstandsforschung (www.ifm-bonn.org).