Basic pension: the most frequently asked questions and answers

Requirements, amount, earning points, income test, allowance – an FAQ on the new basic pension.

Senior sitting smiling in a lounge in a retirement home

Image credit: Michela Ravasio / Stocksy United

Content

  • What is the basic annuity?
  • Do I have to apply for a basic pension?
  • When will the basic pension be paid?
  • Who gets the basic pension?
  • What are the conditions for the basic pension?
  • Can mini-jobbers also get a basic pension??
  • Which periods count as basic pension periods?
  • Which periods do not count as basic pension periods?
  • What is valid for the sliding zone between 33 and 35 years?
  • How much is the basic pension?
  • What income limits apply to the basic pension?
  • What income is taken into account in the income test?
  • Is there an allowance for housing subsidies and basic income support??
  • I live abroad. Can I also receive a basic pension?
  • I am drawing an early retirement pension with a deduction. What does this mean for the basic pension?

Since 1. January 2021, many people in Germany will be entitled to a supplement to their pension, the so-called basic pension. However, the prerequisites for this are complicated and time-consuming to check. It can therefore take some time before the money is actually in the account. The most frequently asked questions and answers about the basic pension.

What is the basic pension??

The basic pension is a supplement to the pension entitlements of low-income earners. It is intended to improve the situation of low-income earners in old age and ensure that they are entitled to more than just the basic pension.

Do I have to apply for a basic pension?

No, no one has to apply to receive the basic pension. The German pension insurance automatically determines whether an entitlement exists and pays out the money accordingly. So you do not have to do anything.

When will the basic pension come into effect?

The law on the basic pension was passed on 1. January 2021 comes into force. However, the payment of the pension supplement has only been running since July 2021. This is due to the high administrative costs. The German pension insurance has to check the claims of about 26 million people.

First, new pensioners receive their basic pension – then, of course, retroactively to January. So no one loses any money .

For people who were already pensioners in 2020, it could still take until the end of 2022 before the money is in the account. When working through the cases of those who are already retired, one will start with the oldest cohorts and then successively work through the others, says Gundula Robbach, President of the Deutsche Rentenversicherung Bund (German Pension Insurance Association).

Who gets the basic pension?

Estimates suggest that around 1.3 million people will be recipients of a basic pension. Since many women, with consideration for their families, have often worked part-time and sometimes in rather low-paid jobs, they will constitute a large group of basic pension recipients. Many East Germans who have worked for low wages will also benefit from the basic pension.

What are the requirements for the basic pension?

To receive a basic pension, you must have a certain number of years of insurance on your pension account, the so-called basic pension periods. In addition, your average gross income from your insurance life counts.

The requirements for the basic pension at a glance

  • at least 33 years of basic pension periods for a partial supplementary pension
  • for the full supplement at least 35 years of basic pension periods
  • Average earnings no higher than 80 percent of the national average earnings, but no less than 30 percent .

Where you stand with your average income can be seen from the earning points (pension points) that are credited to you each year. For example, if you receive a salary that is exactly equal to the average earnings of all employees, you will receive 1.0 EP per year of work . Accordingly, 0.8 stands for 80 percent of average earnings.

Can mini-jobbers also receive a basic pension??

In principle, yes, because mini-job periods count as basic pension periods. Mini-jobs can therefore help you reach the required 33 years. But: When calculating the pension amount, all periods with particularly low income fall through the cracks. This means that anyone who has earned more, at least at times, can receive a basic pension.

It is not possible to receive a basic pension from mini-jobs alone. This can also affect so-called midijobbers, employees with only slightly higher earnings in the so-called transitional sector.

Which periods count as basic pension periods?

The periods of employment subject to social insurance contributions count as basic pension periods, but also

  • Compulsory contribution periods for raising children and caring for dependents
  • Periods and benefits during illness or rehab
  • Consideration periods because of child education and care
  • Substitute periods such as periods of military service, war captivity or political imprisonment in the GDR

Which periods do not count as basic pension periods?

  • Periods in which you received unemployment benefit I or ALG 2
  • Periods of schooling
  • Zurechnungszeit (fictitious extended curriculum vitae to increase a pension for reduced earning capacity)
  • Periods in which you have paid voluntary pension contributions.

What applies to the sliding zone between the ages of 33 and 35??

Entitlement to basic pension already exists with 33 years of basic pension time. However, the full supplement is only available from the age of 35. Those in between receive a correspondingly staggered pension supplement.

Earning points: Important for the pension

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Those who diligently accumulate earning points receive more pension in old age. But what are earning points and how do you get them??

How much is the basic pension?

The amount of the basic pension is calculated individually for each insured person. In the calculation, your previously earned income points (EP ) come into play.

Calculating the basic pension: Here’s how:

  • First, your average EP value is calculated. Years in which you received less than 0.3 EP are not included in the calculation.
  • In the second step, this EP value will be doubled, but to a maximum of 0.8. The difference results in the surcharge.
  • In the next step, the supplement is reduced by 12.5%.
  • The result is multiplied by the number of contribution years, but with a maximum of 35 years.

The arithmetical maximum is 12.25 earning points (0.4 x 35 – 12.5%)

The earning points are converted into a pension payment. Each earning point has been credited since 1. July 2021 for monthly 34.19 euros (West) or 33.47 euros (East). This currently results in a maximum basic pension supplement of just under 420 euros .

Example: How does a calculation of the basic pension look like?

Ms. Schmidt from Leipzig has worked for 40 years and has thus accumulated enough basic pension time to be entitled to a basic pension. However, for 15 of those years, their wages were below the limit of 30 percent of average earnings. In the remaining 25 years, she earned more, on average 60 percent. Only these 25 years with an EP of 0.6 are included in the calculation.

A lump sum of 12.5 percent is deducted from this supplementary amount. The result is 0.175 EP per year. Calculated over 25 years, this results in 4.375 additional earning points.

Since Ms. Schmidt worked in the East, each earning point brings her 33.47 euros per month (as of July 2021-June 2022). In total, the supplement for her basic pension is therefore around 146 euros per month.

What income limits apply to the basic pension?

The full basic pension is only paid to those who earn no more than 1250 euros (single persons) or 1950 euros (couples). If you earn a little more, 60 percent of the income above this level is credited to your basic pension. Above 1600 or 2300 euros, however, that’s the end of it. Income that exceeds this limit is counted in full. The test is repeated annually, as your income can of course change. The allowances are to be adjusted regularly.

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