From January 2021, 1.3 million retirees in Germany will receive a basic pension. But they will receive it later. We show with examples what additional pension a German pensioner can count on.
The basic pension is introduced for older people who worked, but received a salary below the average. In total, about 900,000 women and 400,000 men are eligible for the supplement. They will have to wait several more months for payment, since they will need to check about 26 million accounts. Amounts due from January 2021 will in all cases be paid retroactively.
The idea of a supplementary payment for pensioners who have earned low provision for old age, despite the long period of payment of social contributions, has existed for a long time. The CDU / CSU and the SPD, after lengthy debate, in the fall of 2019 agreed on a basic pension model.
The earned pension supplement is paid to working residents of the country who have worked for at least 33 years, deducting social insurance contributions, and received below average. The length of service includes raising children, caring for relatives, military service or periods of political imprisonment in the GDR. Mini-jobs are also taken into account if the employed paid contributions to pension insurance. The time when the insured received unemployment benefits is not counted as basic seniority.
In order to receive a full basic pension, insured persons must have a basic experience of at least 35 years. Upon reaching 33 years of age, a reduction in payments should be expected. The basic pension will be paid to those who, for all 33 years, received a maximum of 80 percent of the so-called average annual salary. In 2020, it was 40 551 euros and is adjusted annually. Everyone who receives an amount equal to the average salary is awarded 1.0 point. The EP number is important for calculating the pension and therefore the base pension supplements. EP in 2020 was € 34.19 in the west and € 33.23 in the new federal states.
The full supplement is payable if the single pensioner has a monthly income of 1,250 euros. It is based on the payment of pensions, rental income, investments. For spouses or partners, the maximum monthly income is € 1,950. For pensioners with higher incomes, the basic pension can also be paid. However, 60 percent in excess of the “allowed” amount will be deducted from the amount of the premium. There is no tax on income, for example, from volunteer work or from mini-jobs subject to lump-sum tax.
For example. A single pensioner has a monthly income of 1,350 euros. Income up to € 1,250 is not included in the calculation of the basic pension. 60 percent of his income is deducted from his basic pension. In this particular case, the income is 100 euros higher than the allowable one. 60 percent of one hundred euros – 60 euros. It is by this amount that the supplement to the basic pension is reduced.
The maximum possible basic pension supplement is 418.82 euros gross per month.
How is the basic pension supplement calculated? Consider an example of a person who will receive a basic pension supplement of € 314.12.
The pension formula looks like this: monthly pension = points earned x current pension
A resident of Germany for 35 years received half of the average annual wage. For this, he is entitled to half of the retirement point (EP) every year. That’s 17.5 EP over 35 years.
For this, he is entitled to half of the retirement point (EP) every year. That’s 17.5 EP over 35 years. In the west, each EP is € 34.19 (as of 2020). After 35 years, this person’s gross pension is 598 euros.
The basic pension supplement doubles the EP received over a maximum period of 35 years. But there are other limitations as well. The increase in EP will be up to a maximum of 80 percent of the average earnings of 0.8 EP per year. Further, 12.5 percent is deducted from the calculated base pension supplement.
How it looks with an example. Earned by a resident of the country 0.5 EP per year increases to 0.8 EP per year. The EP amount is multiplied by EUR 34.19. This intermediate result is reduced by 12.5 percent (multiplied by 0.875). The amount received forms the basic pension supplement to the earned pension. Thus, the person will receive a pension of 912 euros per month. The premium for health insurance and long-term care is deducted from this amount.
One more example. The employee worked in West Germany for 40 years and received 50 percent of the average salary. Her pension will be 683.80 euros (40 years x 0.5 EP x 34.19 euros).
The supplement to the basic pension (taken into account for a maximum of 35 years) is approximately EUR 314 (EP 0.2625 × 35 years × EUR 34.19). The total pension is 998 euros per month.
Based on materials from LVA, Focus.de, DPA
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