Active retirement for self-employed workers

Is it almost time to retire, but you want to continue working? Active retirement allows you to reconcile both things.
Since 2013, some pensioners have had the possibility of enjoying their retirement pension while simultaneously working in their own business or as an employee. This concept has been dubbed active retirement. If you want to receive your pension but also want to continue to work for yourself or someone else, it is important to understand active retirement and the requirements to benefit from this type of retirement.
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What is active retirement?

Active retirement allows the worker to receive a pension while earning a salary, whether as an employee or a self-employed worker. The work can be part-time or full-time. The purpose of this retirement modality is to increase the sustainability of the pension system and promote active aging. Thanks to the new Law 6/2017 on Urgent Reforms to Self-employed Work, of October 24, the compatibility between pensions and self-employment has been improved. Pensioners who are registered for active retirement and who are self-employed can receive 100% of the pension amount, provided that they prove that they have at least one employee.

What requirements must be met to opt for active retirement?

First, access to the pension will take place once the applicant reaches the age established by law. In 2018, the ordinary retirement age was 65 years for people who made Social Security contributions for at least 36 years and 6 months or 65 years and 6 months for people who made contributions for under 36 years and 6 months.

Secondly, the interested party must have reached the maximum pension that they can receive. Since 2015, this is achieved once you can prove that you have made contributions for at least 35 years and 6 months. This period is also being gradually increased. Starting in 2027, the individual must have been contributing for at least 37 years.

Retired people who have opted for early retirement or who are entitled to a bonus cannot opt for this type of retirement.

What amount does an active pensioner receive?

During the active retirement period, the pension will be 50% of the total established at the initial recognition, once the public pension ceiling or the amount being earned at that time has been applied. This system comes into effect when a person reaches retirement age but wants to continue working. In all cases the minimum supplement is excluded, regardless of the type of work performed by the pensioner or his or her working hours.

Every year, the pension will be revalued according to the law. During the lifespan of this retirement modality, the sum of the pension value and the corresponding revaluations will be reduced by 50%. Furthermore, those accessing the active retirement scheme will not be able to request the minimum supplement.

Self-employed workers can receive the same amount as those who work as an employee.

Before the entry into force of the new Law of October 26, 2017, the value of an active retirement pension was 50% of the standard pension, as mentioned before. There is now an expanded range of active retirement options:

  • One of the improvements included in the law is that, if the self-employed worker can demonstrate that he or she has hired at least one employee, the value of the retirement pension will reach 100%.
  • If the self-employed worker does not have employees, the amount of the pension will be 50% of his or her regulatory base, the same amount given to employed workers.

What happens when the pensioner stops working?

When the pensioner stops working, he or she will begin to receive the retirement pension in full. Contributions made during active retirement (occupational contingencies, temporary disability and contributions to the solidarity fund) will not generate new entitlements.

Do active pensioners make Social Security contributions for their work?

People under this retirement modality will only contribute to Social Security for temporary disability and for occupational contingencies. A special solidarity contribution of 8% must be added to this. In the case of employed workers, it will be distributed between the employer (6%) and the worker (2%).
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What factors need to be considered?

Active retirement can help self-employed workers effectively close their businesses. It is also possible that the future pensioner wants to sell his or her business or transfer it to a third party, so active retirement can be a viable option for supervising the entire process before retiring definitively.

Although active retirement means giving up half of the pension, continuing to work allows the person to earn additional income. Furthermore, continuing to work can be very beneficial for the physical and mental health of the pensioner.

Opting for active retirement as a self-employed worker depends on the different factors mentioned above and the benefit that the person can take from this modality. In short, active pensioners are a very beneficial figure for the system because they take some of the burden of the pension system and continue to pay taxes. Workers, on the other hand, can extend their working life flexibly, as they can do any kind of work, whether as an employee or a self-employed worker.

At BBVA.es you can read more information on the different retirement modalities and decide which regime is best suited to your personal situation. You can also consult the different BBVA pension plans, whether you are retired or not. The pension plan simulator is a very useful tool that allows you to make the most of your resources and thus plan your retirement as efficiently as possible.

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