YOLO is a thing of the past – now comes the pension obligation for the self-employed

I am a lawyer and management consultant – self-employed myself, but comfortably ensconced in a pension fund. So while I have theoretically already secured my retirement through my lawyer’s pension, I am smiling and frowning at the same time at what is happening politically in Berlin. The new federal government (SPD and CDU/CSU, just two weeks in office) has taken on a hot potato: From 2025, solo self-employed people will be required to make compulsory pension and social security provisions. No more excuses along the lines of “I’d rather invest in crypto than in the pension fund”. No – the state is now also extending its social protection umbrella to influencers, coders, designers, craftspeople, etc.

SPD social politicians such as Bärbel Bas – newly promoted to Minister of Labor – are delighted: finally, everyone should pay in. Even Health Minister Sabine Dittmar is applauding in the background, probably in the hope that the self-employed will be less of a burden on the health and care system in old age. The CDU/CSU, on the other hand, nods along somewhat disillusioned, but insists on being “founder-friendly”: the coalition agreement states that new self-employed people will be obliged to make pension provisions, but flexibly and with a sense of proportion. In other words, anyone starting their own business in 2025 must either pay into the statutory pension fund or provide evidence of a comparably secure private pension. In other words, small escape doors are being left open – typical CDU, you could say, as long as the economy doesn’t moan too loudly. But what does this mean in concrete terms for the various types of self-employed people? A personal, tongue-in-cheek situation report.

Influencers and models: from #instalife to retirement provision

Let’s start with perhaps the most dazzling group: influencers, YouTubers, OnlyFans models and all the digital self-promoters who previously thought that retirement provision consisted of followers and merch sales. Many of them haven’t put a penny into pension insurance yet – why should they, living in the here and now, YOLO and all. Well, that will soon be over. Anyone starting out as a self-employed influencer from 2025 will either have to pay into the statutory pension scheme or have a verified private cushion. For our Insta stars, this means that almost 19% of their income could go towards their pension fund in future. 😱 Imagine having to put aside almost a fifth of every advertising deal for your 67-year-old self – now that ‘s a reality check!

An anecdote from my office: Last week, a panicked lifestyle influencer (let’s call her Lisa) called me. She’s wondering whether she should take out a Rürup pension in a hurry just to avoid joining the pension scheme. Although Rürup contracts are tax-advantaged, they are also quite unsexy: you practically don’t get any money before you retire. For Lisa, it feels like she has to lock her money in a safe that she won’t get the key to for another 30 years – no shopping, no spontaneous trip to Bali. Welcome to the real world of retirement planning! Alternatively, she could try to classify herself as an artist for the purposes of the artists’ social security fund (after all, she makes creative videos). But hand on heart: the KSK will do the devil to recognize OnlyFans content as high art. So Lisa has no choice but to swallow the bitter pill: either make voluntary provisions (e.g. with a Rürup contract) or soon be compulsorily insured in the pension fund. My recommendation to her was clear: be smart, do the math and start building up reserves – whether private or statutory, the main thing is to do so. Because the party on Instagram can be over faster than the algorithm changes.

Creative professionals and IT freelancers: between KSK and start-up mentality

Let’s move on to the category of solo self-employed creatives and IT freelancers – e.g. graphic designers, copywriters, web designers, software developers. These people are often the free radicals of the working world: highly specialized, well networked, but often on a solo path when it comes to social issues. Fortunately, many creative people are already insured with the Künstlersozialkasse (KSK) – a strange institution where the state and clients pay half of the social security contributions for artists and publicists. Those who fit into the KSK as freelancers (such as freelance journalists, graphic designers with an artistic portfolio, photographers with artistic aspirations) already pay into the statutory pension scheme, but only about half of the contribution that a “normal” self-employed person would have to pay. For these KSK members, the new pension obligation will not change anything for the time being – they already have exemplary coverage (at least in the eyes of SPD social politicians). On the contrary: perhaps it is now all the more worthwhile to check whether you can join the KSK. Every creative solo self-employed person who has hesitated so far (“Oh, the bureaucracy…”) should seriously consider it: Quickly become a KSK member before the pension obligation hits you full force. Because within the KSK, you only pay half the pension contribution and are also covered by health and long-term care insurance at favorable conditions. Worthwhile protection – even if you have to convincingly demonstrate your artistic activity to the authorities. (A little tip on the side: describing your own job in a more flowery way as “artistic” has already paved the way for some people to join the KSK. Creativity is not only required in your work, but also in your job title).

And what about IT freelancers, programmers and consultants, who usually don’t pass as “artists”? Until now, they have had the greatest possible freedom – often combined with their own risk. Some have made private provisions (a well-diversified ETF portfolio is almost as common in the tech scene as a dark hoodie), others trust that their next start-up will finance their retirement. But from 2025, IT soloists will also have to either take out compulsory statutory insurance or make private provision with the obligation to provide proof. The good news is that the coalition agreement mentions “flexible forms of provision”. Other forms of pension provision are also to be recognized, such as real estate, share savings plans or private pension insurance – as long as they are “reliable and protected against insolvency”. How exactly a freelancer is supposed to prove to the office that their ETF savings plan is “reliable” enough is still up in the air. (I imagine wonderfully bureaucratic scenes: The coder has to submit his securities account to the German Pension Insurance – and a clerk then assesses whether Microsoft, Tesla and Bitcoin ETFs offer sufficient security for old age. Have fun!) Realistically, there are probably only a few recognized options: Rürup pensions are the hottest candidate for a private solution because they are already tax-privileged and cannot be terminated – effectively a private-sector copy of the state pension. Or, alternatively, compulsory entry into the statutory pension scheme.

For clients of these freelancers, the reform brings mixed feelings: on the one hand, it could increase legal certainty if every freelancer officially has their pension plan in place. Until now, many companies were worried that a freelancer could actually be a bogus self- employed person and that they would end up having to pay social security contributions. An indication of bogus self-employment was, for example, if the freelancer had no pension provision of their own and was completely dependent on the client. In future, this criterion will no longer apply to new self-employed persons – they will have to make provisions. However, the core problem remains: when is a freelancer really self-employed and when is he actually an employee in disguise? The new coalition promises to reduce bureaucracy and make clear distinctions. The coalition agreement even mentions a supreme court ruling (“Herrenberg” case) that caused confusion in 2022 because a lecturer was suddenly classified as an employee. The aim is therefore to tighten up criteria, speed up procedures (keyword: fictitious approval – if the clearing office does not decide quickly, the status is deemed to be recognized) and thus reduce the fear of the sword of Damocles of bogus self-employment. As a consultant, however, I would say: Don’t rely on it blindly. Contractors and clients should continue to ensure that contracts are worded clearly, that freedom from instructions and entrepreneurial action are made clear – in short, that genuine freelancing is practiced instead of disguised sham work. The pension obligation does not fundamentally change this, except that it will catch everyone in the future, whether they are pseudo-self-employed or genuinely self-employed.

Artists and photographers: old acquaintances of compulsory insurance

Freelance artists, publicists and many photographers are the group I am most relaxed about. Why? Because they have long been subject to a special form of compulsory pension and social insurance – via the aforementioned Artists’ Social Security Fund. Anyone who earns their living as a painter, musician, writer or artistic photographer is a compulsory member of the KSK anyway (provided the formal criteria are met). This means that these people are already required to pay into the statutory pension insurance scheme, but they receive the aforementioned subsidy from the state and employers. What will change for these old hands in 2025? Hardly anything, actually. They already fulfill the pension obligation.

Nevertheless, there are a few points to bear in mind: Firstly, the KSK could become more popular in future. All those who have perhaps been on the edge of the “artist” definition up to now and have stayed away from the KSK will feel a new incentive to fill in the application form after all. Example: A freelance photographer who mainly shoots weddings and corporate events – until now he thought that KSK was not for him because he was “not artistic enough”. But if he has to pay contributions somewhere from 2025 anyway, he could consider describing his activity in a more creative way (“photographic art documentation of life events” sounds much loftier than “wedding photos”). Secondly, existing artists who are already in the KSK should stop and check whether they are getting everything out of the fund: The pension obligation won’t catch them anew, but perhaps it’s worth paying in a little more voluntarily (within certain limits, you can voluntarily top up your pension insurance contribution) in order to increase later claims. Because the discussion has brought one thing back into focus: artists also live off their pension at some point – and this is often meagre if you have only ever paid in the minimum. Thirdly, a word to clients: if more people are insured through the KSK, remember that you have to pay the artists’ social security contribution on their fees. This is currently around 5%. This is not the end of the world, but some people will be surprised when the tax office or the KSK suddenly comes knocking. So far, this has flown under the radar, but as the number of KSK members increases, the number of audits will certainly also increase. So if you regularly commission freelancers for design, text or photography, you should be aware of the artists’ social security contribution, otherwise you could be in for a rude awakening. But take comfort in the fact that a 5% levy is better than a 100% bogus self-employment claim.

Individual limited liability companies (e.g. games developers): Loophole or dead end?

A particularly sophisticated type of self-employed person is the solo GmbH owner. Let’s take the game developer who has founded a one-man GmbH: He is the managing director of his own company, often a 100% shareholder, and pays himself a salary. Sounds like an employment relationship at first – but far from it. As the controlling shareholder, he is as good as his own boss, and under social security law he is not considered a “real” employee. As a result, he has not had to pay pension insurance contributions for his managing director’s salary until now, unless he did so voluntarily. A legal trick, therefore, to avoid the pension insurance obligation (which would apply, for example, to a freelance developer with only one client). The question of all questions: Will this loophole remain open from 2025?

Of course, politicians have this structure on their radar. Although the coalition agreement only mentions “new self-employed persons”, every lawyer knows that whether I work as a freelancer without a legal form or have a limited company in between, I am ultimately the self-employed person behind the business. I fully expect that clever advisors will recommend en masse: “Set up a limited company, then you won’t fall under the new pension obligation.” And I also firmly believe that the legislator will either make improvements or the courts will decide that the economically self-employed person is covered after all. After all, the purpose of the reform is to bring all solo self-employed people under the umbrella, not to encourage new cherry-picking.

My advice to a one-person GmbH owner (be it a games developer, consultant or anyone else) would still be: wait and see, but be prepared. It is not yet 100% certain how the regulation will be formulated. It could be that formally only natural persons who are newly founded will be subject to the obligation from key date X. In this case, the formation of a GmbH could actually offer (temporary) protection. However, a GmbH is no walk in the park either: accounting, higher tax consultancy costs, minimum capital – all just to perhaps save a few years’ pension contributions? This is only worthwhile in certain cases. And woe betide you if the government decides to close the loophole two years later – then you have tied the GmbH to your leg and can still pay. In short: If you want to set up a GmbH just to avoid the pension obligation, you should think twice and weigh up the pros and cons carefully (it’s best to talk to someone like me about it 😉). It wouldn’t be the first time that a clever trick ended up costing more than the problem it was supposed to avoid.

Craftsman: Welcome to the club (but it was already full anyway)

Last but not least: the craftsmen. Oh, our good craftsmen – whether electricians, carpenters, master bakers or plumbers. Many of them can only shrug their shoulders at the current debate and say: “What’s changing? We’ve always paid into the pension fund!” In fact, there has always been a pension insurance obligation for registered craft businesses. Self-employed master craftsmen have always had to make compulsory contributions, at least for a certain period of time (keyword: exemption option after 18 years of contributions – anyone who has paid in for this long was allowed to apply to leave the pension insurance scheme to continue working privately if they wished). Many tradespeople are therefore familiar with the feeling of dutifully paying their pension contribution every month, without an employer’s contribution, out of their own pocket. For them, 2025 will not bring any dramatic changes – except perhaps the inner satisfaction that the previously “privileged” liberal professions and tradespeople in other sectors will now also have to follow suit. Equality at last! the craftsman might think: “While the designer was able to put every coin into his own equipment or consumption for years, I as a master craftsman have always thought about later – forced to. Now it’s your turn, dear influencers and IT specialists!”

Of course, there are also tradespeople who previously fell off the grid. For example, solo tradespeople without an entry in the trades register (e.g. a self-employed tiler without a master craftsman’s certificate who could formally call himself a “service provider”). Under the new rules, they will no longer be able to get away with this either. In general, the landscape will become more homogeneous: where there were previously exceptions and loopholes, there will be more uniformity. As a lawyer, I generally welcome this – clear rules for everyone, fewer gray areas. But I also know the downside: some tradespeople have found the compulsory contributions a burden, especially in the early years of a business. Especially when income is still low, every euro that is put away “for later” hurts. The coalition promises to make the new pension insurance obligation “founder-friendly”. This probably means that young self-employed people will be given some breathing space at the beginning. Perhaps there will be a grace period of one or two years in which you don’t have to pay in, or only minimal contributions. This has been done before in a similar form – and it would only be fair. After all, whether you’re a craftsman or a designer, in the first few years of business you’re often living off noodles with ketchup rather than the big bucks. If the state comes knocking too greedily, it will achieve the opposite – fewer people will register as self-employed. So it remains exciting to see how flexible the implementation will ultimately be.

Conclusion: Pension provision – a chore or a necessary evil?

As someone who is not covered by the state pension, but by the pension fund, I have a lot to talk about: I pay a considerable amount every month anyway – but at least I know it’s for my old age and I’m not tempted to spend the money elsewhere. Many of my self-employed clients, on the other hand, had to painstakingly impose this discipline on themselves – or didn’t do it at all. That’s the crux of the matter: as much as we can criticize the new pension and social security obligations as an encroachment on entrepreneurial freedom, it’s also true that there are an alarming number of solo self-employed people who put nothing aside for their old age. Whether out of ignorance, carelessness or because their income is barely enough to live on – the result is often poverty in old age and ultimately a trip to the social security office. From this perspective, I can’t blame politicians when they say: “People, make provisions – if necessary, we’ll force you to take care of your future.” That may sound patronizing, but we also accept compulsory seatbelts in cars, even though they restrict our freedom to just drive around.

Nevertheless, there is still criticism: Associations of the self-employed and even some parties (hello, FDP in opposition) warn that compulsory pension insurance reduces the attractiveness of self-employment. Who wants to set up a start-up if they have to deal with pension forms and contributions? The specific structure will be decisive here. If it really is simple and flexible – e.g. a one-stop online verification portal where I enter my pension path and that’s it – then I can live with it. But if it ends up being bureaucratic overkill and you have to disclose every cent of your assets, there will be a huge outcry.

My personal point of view: I welcome the objective, but I keep an eye on the side effects. As a lawyer, I know that well-intentioned is not always well done. In any case, I will advise my clients to be proactive: Anyone who is already self-employed today and doesn’t have to pay in should use the time to put something aside voluntarily – you never know whether in a few years “time there will be an obligation for existing self-employed people as well (SPD Minister Bas is thinking out loud about bringing all – including existing – self-employed people and even civil servants into the pension fund!). Anyone considering starting a business in 2025 or later should factor the additional costs into their business plan. And anyone who works creatively should look into the artists” social security fund right now – it could be the difference between half and full contribution.

Finally, a bit of gallows humor: In my consulting practice, we are already joking that this reform will be a “lawyer employment program”. There are so many detailed questions (from “Does my rented apartment count as a pension?” to “Can I buy myself out of the obligation at 55?”) that my profession certainly won’t get bored. But joking aside – we all need to be clear: The rules of the game for the self-employed are changing fundamentally right now. The pension obligation may seem annoying, but it is politically desired and is coming. You can lament it or make the best of it.

For my part, I will continue to provide independent advice, point out the absurdities with a wink and help my clients to find the best pension strategy for them – statutory, private or hybrid. And maybe, just maybe, in 30 years’ time a few of today’s young influencers will be slumbering in their rocking chairs with a decent pension thanks to this reform, instead of having to ask for donations on Twitch. With this in mind: YOLO was yesterday – think about tomorrow!