Option for a higher insurance category: “investment”, which pays off in 11-14 years after retirement, or even in less than 7 years, if the person concerned declares high incomes of more than 30,000-40,000 euros per year to the tax office. With today’s deadline for 1.2 million professionals to choose how much they will pay in 2023, the dominant question is “whether to choose a higher tier.”

After a fixed 9.6% increase in insurance premiums due to inflation, the monthly payment will be higher for everyone anyway, meaning that changing the level can significantly increase the monthly bill. On the other hand, choosing the lowest insurance category – it has risen to 230.25 euros – gives very low pensions below the poverty line, especially if the insurance period is short.

When choosing the 1st category of insurance (230.25 euros per month plus 10 euros in favor of OAED), the self-employed are, as it were, insured as employees with a monthly salary of 850 euros.

With 25 years of insurance, the pension barely reaches 676 euros, and with 15 years of insurance (the lowest possible), the amount drops to 518 euros, even after the recent increase in the national pension to 369 euros for 15 years of insurance and 411 euros for 20 years or more.

The question is how much the insured will earn for each year that he decides to pay more insurance premiums to increase his pension. It is assumed that for the whole of 2023, the self-employed person chooses the 4th insurance category instead of the 1st. This includes the payment of contributions of 398.02 euros per month, which corresponds to insurance with a salary of 1628.25 euros.

Choosing the lowest category gives very low pensions, on the verge of poverty, especially if the insurance period is short.

1. After 25 years of insurance, the monthly pension will be 682 euros instead of 676 euros. That is, by paying 167.7 euros per month of additional insurance premiums (or 2013 euros per year), the insured provides a permanent increase to his pension of about 6 euros per month or 72 euros per year. This increase wears off after many years (about 28 years). However, if the insured declares high profits (more than 40,000 euros per year), then 44% of the additional insurance premiums will be returned to him as a tax deduction, so the depreciation period is limited to 15 years.

2. For 40 years of insurance, when paying 398 euros per month as insurance premiums, instead of 1053 euros, which will come out with the 1st insurance category, the pension will increase to 1068 euros, i.e. 15 euros more per month (or 180 euros per year). Even if the insured person declares a small profit (less than 10,000 euros), depreciation will occur after about 10 years, and if he declares a profit above 40,000 euros (which means a decrease in taxable income and therefore tax), the depreciation period will even be reduced to 6 -7 years.

Since the introduction of the system with insurance classes, about 8 out of 10 insured people have consistently chosen the lowest insurance class. With the end of the selection period, it will be seen what selections will be this year, which, obviously, will be affected by the fact of increasing insurance premiums.

The previous example shows that choosing a higher insurance category is beneficial if the insured retires with many years of insurance experience (since this increases the proportionate pension compared to the national one) and if he declares a high taxable income, which means that by paying more insurance premiums (which are deductible from taxable income) income tax is also reduced. The “return on investment” naturally occurs after retirement. Well, the 10-year term means that the insured must remain retired until at least age 77.

The figures show that the choice of a higher insurance category for one year does not make much difference to the size of the pension. To ensure a larger pension, it is necessary that larger insurance premiums be paid over several years. The payback period does not change. However, the size of the pension is changing.