Development of the pension within the last decades
Statistically, the current average pension in Germany is around € 1,350 with an average duration of just under 20 years. Nevertheless, the fear of old-age poverty is increasing, especially among younger generations, and young women in particular fear for their future.
Population decline in Germany
The population decline in Germany is seen as a major problem for future pensions. On the one hand, fewer and fewer children are being born, while on the other hand, life expectancy is increasing. As a result, fewer and fewer people are paying into the pension fund, but more and more people have to be paid out. In perspective, there may therefore be an increased imbalance in the coming decades. Theoretically, it could be that the pension system will collapse under this burden one day.
Do all people receive an old-age pension from the state?
Not all people living in Germany are compelled to receive an old-age pension. For one thing, a certain age must be reached and for another, the pensioner must have paid into the statutory fund for at least five years in order to receive an old-age pension at all. Civil servants, soldiers, mini-jobbers as well as many self-employed people do not pay into the state pension fund or are not obliged to do so. It is therefore not guaranteed that everyone will receive an old-age pension. In the worst case, the pensioner has to get by on basic security (Harz IV).
For whom was the pension originally intended?
Originally, the pension was only designed for workers who earned less than DM 2,000 and were over 16 years old. These had to pay into the statutory pension fund. However, the retirement age was 70, despite the life expectancy of about 40 years at the time. As a result, most people did not benefit from the pension age at all and paid in without getting anything in return.
Will the current generation get a retirement pension in the future?
Nowadays, things are quite different, as there are over 20 million pensioners. The retirement age has been lowered and life expectancy has almost doubled. However, the federal government takes a positive view of the future of pensions and asserts that today's young people would also receive a pension in the future in any case.
Nevertheless, the state also advises people to make private provisions, build up reserves and make investments.
Are pensioners allowed to work?
If you retire, you are still allowed to work part-time. The following applies: up to € 6,300 will not be deducted from your pension. If you plan to earn more, you must calculate with a partial offset.
Early retirees must also reckon with additional deductions if they work during their pension. These deductions depend on:
- Retirement age
- Earnings
- Number of years paid in
These factors are used to calculate pension deductions, as well as offsets and other financial "penalties".
Of early retirees and pension deductions
In general, it can be said that secondary employment that does not exceed a monthly salary of 450 € is unproblematic. These are not offset against the pension.
The situation is different for higher amounts. These are not only offset against the pension, but also lead to higher taxation. There are exceptions in the case of widows' pensions. If a pensioner receives this additional pension, everything from €803.88 or €756.62 is reduced by 40%. The amounts mentioned do not represent the possible additional income, but the total income, i.e. also the pension payments.
Before you take up an activity, find out from your local pension fund to what extent it would be worthwhile for you. This will help you avoid unpleasant surprises and possible additional payments.
Is the old-age pension taxed?
Since 2005, the new deferred pension taxation has come into force. Under this system, investments for old-age provision are to be tax-free for a start-up period of 35 years. In return, however, the later pension is taxed. This has the advantage of reducing the financial burden on workers, as much can be deducted from tax. As a result, people have more money at their disposal during their working years.
However, as soon as the current generation retires, they will have to pay tax on it. However, this programme is still worthwhile because many of the future pensioners' incomes will be below the tax threshold. Thus, they will also be exempt from tax and will not be at a disadvantage.
Do mothers have pension disadvantages due to childbirth?
As a rule, mothers will not suffer any disadvantages, as the planned parental leave of 3 years will be replaced. In the case of a birth, a three-year average pension is paid into the pension fund for the new mother in order to prevent disadvantages. The 3 years apply per child. If a woman has 2 children, the entitlement increases accordingly to 6 years.
Furthermore, a new form of maternity pension is to be introduced from 2019 to protect mothers from low pensions. All women who gave birth to children after 1992 will receive an additional half pension point per child.
Is the partner's pension taken into account?
No, the partner's pension is not deducted from one's own pension. Each person receives the pension that he or she once paid in. However, it is possible for spouses who have large differences in pension amounts to split their pension entitlements. This is done by making a declaration to the pension fund and results in both parties receiving the same pension. For this purpose, the individual pensions are added up and divided fairly between the two pensioners.
The following points must be observed when splitting pensions:
- The marriage must have existed since 2001 or later.
- The partners must each have paid into the statutory pension fund for at least 25 years.
- Both parties must be at least 50 years old.
Caution: If you choose pension splitting, you will not be entitled to a survivor's pension afterwards.
Do foreigners receive an old-age pension?
Yes, foreigners also receive an old-age pension in Germany. However, they must also fulfil certain criteria in order to receive it. The assumption that one comes to Germany and is entitled to a pension without further ado is fundamentally wrong.
These respective criteria for receiving a pension depend on the country of origin and must always be examined individually. Only 7% of pension claims are of foreign origin, which makes the checks very manageable.
