Flexible employment personnel have the freedom to choose a contribution base between the upper and lower limits of the national regulations when paying for pension insurance. Some people prefer to choose the 60% tier, while others opt for the 100% tier. Which of the two pension insurance contributions, or the shorter duration, is more advantageous?

How much pension benefit can be generated from pension insurance contributions?

How much does it cost in total to pay pension insurance? The latest contribution base for Shandong Province announced for 2024 is from 4,416 yuan to 22,078 yuan. The 60% tier is 4,416 yuan, and the 100% tier is 7,359 yuan.

The contribution rate for flexible employment personnel is 20%. This means that for the 60% tier, one needs to pay 883.2 yuan per month, totaling 10,598.4 yuan per year. For the 100% tier, the monthly payment is 1,471.8 yuan, and the annual payment is 17,661.6 yuan.

How much pension can be generated from these two types of contributions?

The benefits generated from participating in pension insurance mainly include the basic pension, funeral allowance, and consolation money. For the payback period, we only compare the basic pension. The basic pension is calculated in two parts: the basic pension and the personal account pension.

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① The basic pension is equal to the pension payment base of the year of retirement × (1 + the average contribution index of the individual) ÷ 2 × the number of contribution years × 1%.

The pension payment base for Shandong Province in 2023 is 7,468 yuan. According to the past trend, it is expected to increase by about 3.2% this year, reaching approximately 7,700 yuan.In fact, the rule for the basic pension is that if the average contribution index is 0.6, one receives 0.8% of the pension base for each year of contribution. If the average contribution index is 1.0, one receives 1% of the pension base per year of contribution.

If retirement is in the future, the pension base will still increase, but it will eventually transition to the full range of the social average wage.

Calculating with a base of 7,700 yuan, at the 60% tier, the monthly basic pension for one year of contribution is 61.6 yuan. At the 100% tier, the basic pension would be 77 yuan.

②The personal pension is equal to the balance of the individual's social insurance account divided by the number of months determined by the retirement age.

The balance of the individual account is calculated at 8% of the monthly contribution base, which is exactly 40% of the social insurance contribution amount.

At the 60% and 100% contribution tiers, without considering interest, the individual account can accumulate 4,239.36 yuan and 7,064.64 yuan in one year, respectively.

The number of months for the pension calculation differs for retirement at ages 50, 55, and 60, which are 195 months, 170 months, and 139 months, respectively.

Assuming retirement at the age of 60, one can receive a personal account pension of 30.5 yuan and 50.82 yuan per month.

Combining these two parts, for the basic pension part, one can receive 92.1 yuan and 127.82 yuan per month.This is the treatment for paying fees at the time and retiring at the time, without considering the future increase in pension, the payback time will be respectively:

① 10598.4 ÷ 92.1 = 115 months;

② 17661.6 ÷ 127.82 = 138 months.

The payback time is approximately 9.58 years and 11.5 years. It is clear that the payback time for the 100% tier payment is longer.

However, the payback time mentioned above is just a static calculation. If we consider the increase in the pension calculation base at the time of retirement in the future, and the growth of the pension after retirement, the payback time will be shortened.

In addition, in the event of the death of the insured person, family members can also receive funeral subsidies and survivor's consolation money, as well as the balance of the personal account of the pension insurance. Especially the standards for funeral subsidies and consolation money, the 60% tier and the 100% tier are the same, and from the cost-effectiveness point of view, the 60% tier is better.

However, the pension received at the 100% tier is indeed higher, and the protection for the elderly will be better, which is a matter for a lifetime. How should everyone make a choice? #Pension#