Pension Schemes for the Self-Employed in OECD Countries
The self-employed workers make up a small but significant minority of the workforce in many OECD countries. Moreover, transitions into and out of self-employment have become much more common for a larger group of workers. It is therefore of critical importance to review and assess the pension schemes available to self-employed workers across OECD countries. Given employment and income patterns commonly observed for this subgroup, it is also important to address the issue of compliance and enforcement towards a formal affiliation of this group to pension schemes on offer. This paper reviews three key aspects of pension schemes available to self-employed workers: coverage, contributions and benefits. In each part, analyses are undertaken not just by describing the rules governing these schemes but also looking into their actual functioning in terms of compliance and enforcement.
Key findings include the fact that the self-employed are covered by the same pension schemes as those of employees in the majority of countries. One important difference is that, while employees share the contribution burden with their employers, the self-employed workers in most cases pay the full pension contribution from their own income. The rules for pension entitlements, on the other hand, are usually almost identical to those that apply to employees. One key conclusion emerging from this paper is that the pension provision for the self-employed is a matter of practical implementation of existing schemes rather than overhauling pension rules for these schemes. Low coverage is a common problem for this group in some OECD countries, as they belong to the informal sector and their incomes are hard to identify.
Contribution evasion or under-reporting of income by the self-employed is prevalent even in some
countries with high per capita income. This has implications as these self-employed workers will have lower levels of pension incomes at retirement. In some cases, low contributions coupled with relatively generous pension rights also raise an issue of equity in the provision of pensions for the self-employed and employees.