What takes a long time is finally getting – quite complicated. The idea of a basic pension has been circulating for years, and the ruling parties have been arguing violently for months. The package is now ready to go. But what’s in the end? Who gets money And when? And how much? Here you will find the most important answers.
After months of struggle, the grand coalition will decide on the basic pension in the Bundestag on Thursday. The way for the performance that has been under discussion for years has been cleared after the Union has given up its resistance to funding from the federal budget.
What are the costs and how should the basic pension be financed?
Federal Labor Minister Hubertus Heil from the SPD puts the costs for the starting year 2021 at 1.4 billion euros. Pension insurance funds are not to be used for this purpose, rather financing from tax funds is planned. The SPD actually wanted to use the planned financial transaction tax for this. However, their introduction is completely in the stars, now funds from the federal budget are to be used – as long as no others are available, as CSU regional group leader Alexander Dobrindt emphasizes.
When does the basic pension come?
After the draft law in the cabinet had passed, the German pension insurance company had already raised concerns that the introduction of the new benefit on January 1, 2021 could be difficult due to the considerable administrative effort involved. Pension insurance sees even bigger problems because of the Corona crisis – also because there are many employees in the home office.
The government is now proposing a staggered introduction. According to this, new pensioners who are entitled to benefits would be the first to receive the basic pension. Those who are already retirees will probably have to wait until the end of 2022 for a payment – and will then receive the basic pension retrospectively. Deutsche Rentenversicherung expects payment to existing pensioners to start in July 2021.
Who is entitled to the basic pension?
Low-wage earners are to be given a supplement to the pension after 33 years of basic pension periods, which is at full level from the age of 35. Basic retirement periods arise from the payment of compulsory contributions from work and from contribution periods for child rearing and care for relatives. Minister of Labor Heil expects 1.3 million recipients – 70 percent of whom are women.
How is the altitude calculated?
A basic pension can be paid if your own contribution to the pension insurance was or is at least 30 percent of the average earnings of the insured. The entitlement to a pension is doubled for a maximum of 35 years, but may be limited to 80 percent of average earnings. In the end, the surcharge is reduced by a flat rate of 12.5 percent.
What income is counted towards?
In the case of single people, income below 1250 euros is not counted, for couples it is 1950 euros. Income above this is credited 60 percent to the basic pension. Income is only fully taken into account if the amount exceeds EUR 1,600 or EUR 2,300.
Investment income above the saver’s allowance should also be taken into account. Pensioners will therefore have to report corresponding investment income to the Deutsche Rentenversicherung. The pension insurance can then check the information. The same applies to foreign income.
Tax-free income, such as from a voluntary activity and that from flat-rate taxed marginal employment, so-called mini jobs, are not taken into account.
How high is the basic pension?
A low-wage earner with 35 years of basic pension periods can, under certain conditions, achieve a supplement of up to EUR 404.86.
Do low-income earners have to apply for the basic pension?
No. Whoever is entitled should be determined by an automatic data comparison with the tax offices.
What is the allowance for basic security?
Those who still receive benefits below the state basic security after 33 years of contributions despite the basic pension should benefit from an allowance that is not offset against the basic security. It is 100 euros plus 30 percent of the higher income from the statutory pension. In total, however, the non-deductible sum may not exceed 216 euros. The allowance introduced in 2018 for a company or state-sponsored private pension, such as the Riester pension, is also granted.