Shrnutí: Self-employed people often have a lower retirement pension than employees with the same real income. This is mainly due to the payment of minimum social insurance contributions, which are then used to calculate the pension. In this article, we explain how the pension of self-employed workers is calculated, how much self-employed workers have to pay in social security contributions, when they become entitled to a pension and what you can do to increase your future pension.
Self-employed people often have a lower pension than employees because most self-employed people only pay social security on the minimum assessment base. Many entrepreneurs only achieve a pension around the minimum threshold or well below the average for employees.
The amount of the pension is mainly influenced by:
If you want to find out whether the CSSA has calculated your pension correctly or how to increase your future pension, just contact us.
If you are self-employed (self-employed) then you must make at least the minimum social security contributions from your income. At present, these minimum contributions amount to CZK 5,720 per month for the main activity andCZK 1,574 for the secondary activity.
Many sole traders do not find out the real impact of low contributions until several years before retirement. At that point, there is limited room for pension increases. If you want to check how much pension you can expect or whether it is worth changing your contributions, our solicitors can advise you.
Being self-employed involves many levies and payments. What does this involve and what will change for the self-employed in 2025? That’s what we look at in our article.
Social insurance, or social security contributions, are used to ensure decent conditions for you and your fellow citizens. In practice, most social insurance goes on old-age pensions and health care, which together account for about ¾ of all spending. In addition, social insurance also finances e.g. unemployment benefits, housing allowances and disability pensions.
The pension system is based on pay-as-you-go financing, where you, as current workers, contribute part of your income to finance the pensions of current pensioners. So it doesn’t work that you save for your own retirement through social insurance.
Or was your retirement pension benefit calculated differently than you expected? We can help you find out how the Social Security Administration assessed your situation and check whether there was an error.
The conditions for entitlement to a retirement pension are regulated mainly by the Pension Insurance Act.
To qualify for an old-age pension as a self-employed person, you must meet two basic conditions: you must reach retirement age and you must have completed a minimum period of pension insurance.
The retirement age is gradually increasing in the Czech Republic. For people born in 1965, it is 65 years old, then rising to a maximum of 67 for younger people. For older people, the retirement age is determined by year of birth, sex and, for some women, the number of children raised.
To qualify for an old-age pension, it is generally necessary to have at least 35 years of pensionable service or at least 30 years of purely contributory service. In addition to employment or business, some alternative periods of insurance, such as childcare, may also count towards the required period.
You can read more about the conditions to be met and how to apply for an old-age pension in the next article.
The specific amount you will receive in your pension is determined by the income on which you have paid social security contributions. Many self-employed people pay only the minimum social security contributions, which will be reflected in the pension you receive.
Example: let’s say you use a flat-rate tax and your flat-rate spending is 40%. Realistically, you have 50,000 crowns in your pocket at the end of the month, but you pay social security on a much lower amount. You are therefore seen as having earned just over 20,000 in a given month. From your real earnings of CZK 50 000, 40% is deducted, which represents your expenses, as well as your income tax, social security and health insurance contributions, which amount to at least CZK 7 498. Compared to an employee with a gross salary of CZK 50 000, your pension will be significantly lower.
In practice, we often encounter entrepreneurs who have high real incomes, but due to the minimum contributions, their pension is only slightly above the minimum threshold. Many clients mistakenly assume that it is the actual income that is decisive, not the assessment base for social insurance.
For a more detailed calculation of your pension, use the pension calculator on the Czech Social Security Administration website.
For self-employed workers, the basic pension rule is the same for all pensioners. So if you meet the conditions for earning pensions, you will be paid at least this basic amount. This is set separately for each year and this year it is CZK 4,400.
Even as a self-employed person, you can take early retirement. However, two conditions must be met – you must be over 62 years old and you must have met the minimum period of social insurance payments, which in this case is 40 years. You also have to take into account that the pension you will receive in retirement will be lower.
Early retirement can be a good option, for example, if you have health problems or a drop in income. However, each case needs to be assessed individually, as incorrect timing can mean a permanently lower pension by thousands of crowns a month.
Restrictions also apply if you would like to continue to run your business even in early retirement. This is because until you reach retirement age (e.g. age 65), you must not engage in any activity that would trigger compulsory insurance contributions. The specific amount you must not exceed this year is set at CZK 105,520 per year. However, once you reach retirement age, you can start your business again without any restrictions.
Find out more about earning extra money in retirement in our next article.
As we have already mentioned, self-employed people have much lower pensions than employees. So how to solve this situation? There are several options. First of all, you can voluntarily increase your assessment base and start paying a higher amount of social insurance. However, a more sensible step is probably to save and invest on your own.
For example, you can opt for a supplementary pension saving scheme. This is savings for retirement that is supported by the state through regular contributions and tax relief. The amount of the monthly contribution from the state varies according to the amount you send into the savings each month. The lowest amount is set at 300 crowns with a state contribution of 90 crowns. The maximum you can get from the state is 340 crowns if you save at least 1,700 crowns a month. In addition, you can also write off your savings expenses against your taxes.
Another way to secure a higher pension is to start investing. There are a number of options. Traditionally, you invest in gold or real estate. However, you can also invest in shares of various companies or bonds. Mutual funds, which are managed by professionals and combine different types of securities (stocks, bonds, etc.), are also typical. The current trend is to invest in cryptocurrencies.
In practice, we often see situations where people do not start to address the issue of retirement until they are in their sixties. At this stage, the possibility of significantly increasing their pension is limited, so it is worth planning for retirement well in advance.
How to get started with investing in stocks? Find out in our article.
Before investing, however, a few things need to be made clear. The key factor is the time horizon. The earlier you start investing, the more you can take advantage of compound interest and invest in riskier but higher-yielding assets such as equities. Then, as you approach retirement, it’s a good idea to move your portfolio into more stable assets to reduce the risk of loss.
It is also important to diversify, i.e. to combine different types of investments (e.g. stocks, bonds and property) to ensure the stability of your portfolio. This is because if one type of investment starts to have problems, you won’t lose all your investments, but only one type.
Self-employed people are required to make minimum contributions to National Insurance, which affects the amount of their future pension. To qualify for a pension, the self-employed must reach pensionable age and meet the minimum period of insurance. The amount of the pension depends on the income on which the insurance has been paid.
In order to increase the pension, it is recommended to increase the assessment base, save or start investing money in, for example, real estate, shares or cryptocurrencies. Diversification of investments and time horizon are also important.
Yes, but only if you have earned pensionable income from your secondary activity.
Yes. Higher contributions can increase future pension payments because the assessment base will increase.
The informative pension application of the Czech Social Security Agency or the pension calculator can help.
It depends on age, income and other investments. In some cases, self-investment may be more beneficial.
Yes, but only to a limited extent so as not to trigger compulsory participation in social insurance.
Did you apply for a disability pension and get a denial instead of the expected award? Or was your retirement pension calculated differently than you expected? We can help you find out how the Social Security Administration assessed your situation and check whether there was an error.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 15 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 15 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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