Your business is running well, and it seems as if nothing can stop you. But what happens when you can’t work anymore or don’t want to work anymore? Have you thought about what you should do?
Many self-employed people don’t think about saving for a pension until it’s too late. For employees, pension savings are usually part of their employment contract, but the self-employed do not automatically have a savings scheme and therefore you have to make some active choices.
Like everyone else, you are entitled to the state retirement pension when you reach the state retirement age, but the state pension is unlikely to be enough if you are used to earning more in your business. And if you are self-employed, you do not qualify for a labour-market pension, and therefore neither are you covered by insurance which automatically follows with the labour-market pension, such as life assurance.
It’s probably a good idea to consider making contributions to ATP Livslang Pension. With this solution, you put money aside for your pension, and you have life assurance to secure your closest family a lump sum if you should die. ATP Livslang Pension is a collective pension insurance under which the principle is that you and your employer or the state pay into your pension with ATP. Therefore, if you are self-employed, you have to set up payments yourself.
Another solution is to set up an individual pension savings scheme through a bank or a pension company. You can also do this as a supplement to ATP. IDA recommends that you set up a pension savings scheme with either ISP Pension or DIP. Contact them for personal advice.
A third solution is to save up in your business and use of the profit from the sale of your business when you retire and take a pension. Borger.dk states that, in connection on the sale of a business, taxable earnings of up to DKK 2,743,700 (2018) can be paid into a pension scheme with tax benefits. Every year, you can pay up to 30% of the profit of your business into an individual pension scheme and obtain full tax allowance for your contributions. The disadvantage is, however, that you will never know how much your business will ultimately earn, and therefore it’s a good idea to have other pension savings.
Like anyone else, you can make contributions to an early-retirement scheme (efterløn) via your unemployment insurance fund (A-kasse). And when the time comes that you want to draw on your voluntary early retirement pension, you can also work self-employed while receiving your early-retirement pension. This will be in accordance with one out of four early-retirement schemes.
Read more about the four schemes at borger.dk and note that your working hours will be deducted from your early retirement pension.
If you have more questions regarding voluntary early retirement (efterløn), contact Akademikernes A-kasse
IDA recommends that you set up pension savings with either ISP Pension or DIP.
IDA provides legal advice for the self-employed and freelancers, and for those who are employees and self-employed at the same time. Get legal counselling.