The pension – a longing and a nightmare scenario in equal measure. But regardless of whether you have enough money in old age or what you want to do with the long time after working life, there are a few stubborn assumptions about the subject of statutory pensions. Here you are.
Word has gotten around that the pay-as-you-go pension system in this country is on shaky ground. Because in the future there will be many old people in this country and, in return, few young people. In other words, there is a lack of contributors. The fact that the pension system is facing major problems as a result needs no further explanation. However, there seem to be only three solutions: raising the retirement age, increasing contributions or reducing benefits.
But the prospect of having to stoop a year longer for the already meager income in old age causes few people to be cheerful. And even a massive increase in pension contributions to get the problem under control is out of the question for politicians. Not even lowering the pension level. The fear of the anger of the voters is too great. Now the so-called share pension should cushion the problem. At least that is what is anchored in the coalition agreement of the current government. However, there is still a lack of concrete plans.
What remains is a lot of uncertainty about how the state pension will be secured in the future. But apart from that, there are some erroneous assumptions about pension payments without any worries about the future, as the German pension insurance company informs. Here is the fact check:
Everyone has to work until 67
No. The standard retirement age of 67 only applies to those born in 1964 or later. For those born before this date, the age limit increases gradually from 65 to 67 years.
If you have paid into the pension fund for 45 years, you can retire at 63 without any deductions
Not entirely correct. Anyone who has paid contributions to the pension insurance scheme for 45 years is entitled to an old-age pension without deductions for those who have been insured for particularly long years, but only after the relevant age limit has been reached. Depending on the year in which the insured was born, this is between 63 and 65.
In 2012, the retirement age started to increase. In the course of the gradual increase in the retirement age in the statutory pension insurance (“pension at 67”), the age limits will also increase by another month this year. Insured persons who were born in 1956 or 1957 and for whom no confidentiality protection regulations apply reach the standard retirement age at 65 years and ten months or at 65 years and eleven months.
For the following birth cohorts, the standard retirement age initially increases by a further month; From 2024, the age limit will be raised in 2-month increments, starting with those born in 1959. For insured persons born in 1964 or later, the standard retirement age of 67 years applies.
If you earn additional income from a job, your pension will be reduced
Usually no more. Until now, anyone who retires earlier and earns something extra had to make sure that certain limits were not exceeded – otherwise the pension would have been reduced. This additional income limit was completely abolished in 2023. If you retire at 63, you can now earn as much as you want in addition to your pension. The regulation applies to people who retire with 35 years of contributions but have not yet reached the standard retirement age.
During the last two Corona years, the additional earnings limit for early retirement pensions was significantly higher than in the years before. Instead of 6300 euros, early retirees were allowed to earn up to 46,060 euros a year. With the complete abolition of the additional earnings limit, the legislator wants to counter the shortage of skilled workers and make the transition from working life to retirement more flexible. There was and is no additional income limit when you reach the regular old-age pension.
However, the additional earnings limit was not abolished for all those who receive a full or partial disability pension. However, the additional earnings limit for disability pensioners will be increased. With a full disability pension, it was raised this year from the previous EUR 6,300 to EUR 17,272.50. Anyone who is only partially disabled must have their additional income limit calculated individually by the pension insurance. So far, however, the limit was at least 15,989.40 euros per year. This value increased in 2023. More than twice as much to 34,545 euros.
In the case of early retirement, the deductions end when the regular old-age pension is reached
Unfortunately not. Anyone wishing to claim an old-age pension for long-term insured persons or an old-age pension for severely disabled people before reaching the regular retirement age must accept a deduction of 0.3 percent for each month of early retirement. Anyone who is 55 years old today and wants to retire at 63 has pension reductions of 14.4 percent. However, these deductions can be fully or partially offset by insured persons from the age of 50, if they can show at least 35 years of insurance in the pension insurance when they plan to retire, including childcare times and school times, through special payments into the pension fund.
However, early retirement is only possible for those who have accumulated 35 insurance years. Those who do not receive a pension until they reach the standard old-age pension at the age of 65 or 67. It should also be borne in mind that the pension reduction will last a lifetime. It does not disappear as soon as insured persons have reached their regular retirement age. There are only exceptions for people with severe disabilities.
But still: If you have a minimum insurance period of 45 years, you do not necessarily have to wait until you reach the standard old-age pension in order to retire without deductions. This group of people calls themselves “particularly long-term insured persons”.
The last few years before retirement are particularly important for the amount of the salary
No. The amount of the pension does not depend on the payments made in the last few years of work, but results from the entire insurance life. Only when the highest earnings are made in the last few years before retirement do these times ensure a particularly high increase in pensions.
The pension is automatic
No. First, you must apply for a pension. It is important to do this in good time. The application should be received by the pension insurance three months before the desired date. If there are still unsettled times in the course of the insurance, then better a little sooner. Important to know: The statutory pension can be applied for up to three months retrospectively. Anyone who is late suffers financial losses, since the payment then begins later – without additional payments.
The application forms are available from the counseling centers or the municipal administrations. The application can also be requested.
If you don’t want to struggle through the paper mountain alone or want to find out more beforehand, you can get help free of charge from one of the advice centers. The corresponding contact points can be found at deutsche-Rentenversicherung.de. You can make an appointment by calling 0800/10004800. Identity card, tax ID and health insurance data should be brought to the interview.
Another possibility is the services of a free pension consultant. He helps to clarify gaps and to fill out the application correctly or to have it checked whether there is the possibility of increasing the pension or even securing it at all by paying voluntary contributions. Depending on the amount of work, the fee is around 400 euros.
The spouse’s old-age pension is offset against your own old-age pension
That’s not true. The spouse’s old-age pension is not offset against your own pension. There are only exceptions for pension entitlements under the Foreign Pensions Act.
The pension must be fully taxed
Not yet. Those who retire in 2022 pay taxes on 82 percent of their pension. For new pensioners arriving in 2023, the taxable portion of the pension has increased to 83 percent. This means that only 17 percent of the first full gross annual pension remains tax-free. All pensions beginning in 2040 or later will then be 100 percent taxable. In the case of existing pensions, the fixed tax-free pension amount remains. Since 2005, pensioners have had to pay tax on part of their retirement benefits. The tax-free allowance has been reduced annually since then.
Only those whose pension is lower than the basic allowance of 10,908 euros for single people (double that for married couples) are tax-free. The background to the dynamic pension taxation is the conversion of taxation to a downstream system. This means that the contributions to the pension insurance can be deducted from tax during the working life and the pension must be taxed in the payment phase.
Women are allowed to retire at 60
That was once. This only applied to women who were born before January 1, 1952 – and only for them if they had paid compulsory contributions to the pension insurance for more than ten years after their 40th birthday.
Husbands are not entitled to a widow’s pension
But. Or more precisely, they receive a widower’s or survivor’s pension. These exist under certain conditions. The deceased partner must have paid into the pension for at least five years and the marriage or registered civil partnership existed for at least one year, as the German pension insurance association explains.
However, if a marriage is only concluded in order to secure a pension for the partner, the pension insurance usually rejects a payment because a so-called “support marriage” can be assumed. In this case, there is no entitlement to a widow’s or widower’s pension.
But there are also exceptions to the requirements that have to be met: If the spouse dies, for example, in an accident, as a result of a sudden illness, or if there is a joint underage child, the survivor is entitled to a pension even if the marriage was shorter.
If a support marriage can be ruled out and the deceased spouse has fulfilled the so-called waiting period, nothing stands in the way of a widow’s or widower’s pension being granted upon application. A distinction is made between a small and a large widow’s pension. You can read here what this is all about and how high the payments are.
The division of pensions after a divorce is final
Only partly true. If a marriage fails, the big arithmetic begins. In addition to any maintenance costs and the division of material goods acquired during the marriage, a pension adjustment is usually due. Unless this has been expressly excluded. If this is not the case, all pension entitlements acquired during the marriage will be divided equally between the two spouses and offset against each other by the family court. This applies to both statutory and private pension insurance, company pension schemes and pension entitlements from civil servants.
An insured person’s pension that is reduced due to a pension equalization may also be paid in full: If the former spouse whose pension entitlements have increased as a result of the pension equalization dies, the pension of the party obliged to equalize can be paid in full in the future upon application. The prerequisite is that the deceased has not received an increased pension for more than three years as a result of the pension equalization. The adjustment of the pension is only possible from the month following the application, which is why care should be taken to submit an application to the responsible pension insurance or pension provider as quickly as possible.
And if the marriage only lasted three years or less, a pension equalization only takes place if one or both former partners apply to the family court. If the entitlements of the ex-partner are predominantly of equal value or if the entitlements are individual, insignificant, the family court will not settle the matter. But even in the case of gross misconduct on the part of a spouse, there is usually no compensation.
In principle, however, married couples can also make their own arrangements for structuring their pension provision in the event of a divorce. In order to be valid in court, these must be certified by a notary. In this way, a pension equalization can also be completely ruled out.
A rehabilitation benefit leads to a reduction in the later pension
No. A rehabilitation measure does not reduce the later pension. During rehabilitation, compulsory contributions to the pension insurance are usually paid, which increase the subsequent pension entitlement. In addition, successful rehabilitation usually leads to longer employment and thus to a higher pension.
Apprentices only have protection against reduced earning capacity after five years
Not right. There are special regulations for young professionals with regard to the pension due to reduced earning capacity: trainees are covered by statutory pension insurance from the very first day in the event of an accident at work or an occupational disease. However, all other employees must be insured with the German pension insurance for at least five years before the onset of the reduction in earning capacity.
(This article was first published on Sunday, February 12, 2023.)
