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Basic pension and money in old age: This is how much you get paid out

The new basic pension has been in effect since January 1, 2021 and is primarily intended to support those who have worked a lot but earned little. But who actually gets a basic pension? And is it worth it?

They sit at the checkout or clear the shelves in the supermarket. They care for the elderly or sick, they take care of children, clean offices and apartments or help on construction sites: there is a long line of people who work a lot but earn little. And those who earn little in their professional life also get a small pension. So narrow that sometimes it is not enough.

To mitigate this injustice, the basic pension has been in place since January 1, 2021. According to the federal government, around 1.3 million pensioners were entitled to the start.

The first requirement is: You must have been paying for 35 years. Compulsory contributions from employment or self-employment are taken into account. The times spent caring for relatives or raising children are also counted if they were paid for by the state. Times of illness or rehabilitation are also taken into account. In addition, there is a time corridor: Anyone who has paid in for at least 33 years, but not 35 years, gets a small top-up. This increases every month until the full basic pension is reached at the age of 35.

Income level is crucial

The legislator has set limits on the amount of income – both upwards and downwards. The total income must be no more than 80 percent of the average in order to claim a basic pension. This average income is currently between EUR 1,013 and EUR 2,703 gross per month. Anyone who earns significantly less is also excluded. Because in order to exclude the claims of so-called mini-jobbers, there is also a lower limit. And that runs at 30 percent of the average income. That is currently 1039 euros gross per month. Only the years count for the basic pension, in which the income was in this range.

An example: If you have worked 45 years in your life, but 15 of those years were over the limit, you can only bring in 30 years for the basic pension. The amount is calculated based on earnings points, a system that also applies to normal pensions. The corridor of earnings points is between 0.025 percent and 0.8 percent of the average salary. As wages rise, the limits for earlier years are lower.

This is how the basic pension is paid

The good news: Anyone who is eligible for the basic pension will be contacted – you don’t have to become active yourself. The bad news: Don’t expect much. Because the complicated calculations with the remuneration points and credit periods rarely make up large sums when expressed in euros. According to the “Stiftung Warentest” it is an average of around 75 euros more for pensioners. But: Up to 420 euros per month are possible in the toughest cases.

Important to know: If you have other income in addition to your pension – from a job or rental income – you may get nothing. The allowance is 1250 euros per month for singles and 1950 euros for couples: You are only entitled to the full basic pension up to this amount. However, there is no wealth test. So if you own real estate or land or hoard gold in a vault, you don’t have to worry – the basic pension will still be paid.

The period with which the tax office expects will cause confusion. Because the reference period is always the year before last, i.e. 2019 for 2021. For new pensioners who retire in 2021 or 2022 and have still earned a decent amount in the previous years (or have income from renting or from share profits), this means: for two years they are out and not entitled to basic pension.

Concrete examples of the basic pension

The gives some examples to clarify the procedure:

Ms. Müller lives in West Germany, has worked for 40 years and earns around 50 percent of the average wage, which is 40,551 euros in 2020. This results in a separate pension of EUR 661 (40 years x 0.5 payment points x EUR 33.05). Now comes the detailed calculation process:

The average payment points are doubled and limited to a maximum of 0.8 payment points. There is a surcharge of 0.3 payment points, which is reduced by 12.5 percent (= 0.2625 payment points). This surcharge of 0.2625 earnings points is calculated for a maximum of 35 years. The surcharge for the basic pension is therefore around 304 euros (0.2625 earnings points x 35 years x 33.05 euros).”

If Mrs. Müller were still working part-time as a pensioner, it would look like this: With her part-time job and her pension, she has a monthly income of 1450 euros. Income up to 1,250 euros is not taken into account, this is the exemption limit. 60 percent of the income in excess of this is deducted from the basic pension. There are 200 euros above the income limit, 60 percent of which is 120 euros. The surcharge for the basic pension of 304 euros will be reduced by 120 euros. The basic pension is therefore around 184 euros.

The pension insurance is still examining the claims of senior citizens. This should continue until the end of 2022. The payment will then take place retrospectively.

Source From: Stern

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