As of: February 17, 2024, 6:10 a.m
By: Maximilian Hertel
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Is the gross wage enough for a decent pension?
The pension formula makes it easy to calculate the amount for different incomes.
Frankfurt – An increase in the pension is planned for summer 2024.
But exactly how much of this ends up in your own account is not always easy, as there are a number of factors that have to be taken into account when calculating your net pension.
However, how high your pension will be can be calculated using a simple formula.
This is how you calculate what you will receive as a pension with your salary - the pension formula
The so-called pension formula can help to answer the question of how high your salary will be in your well-deserved retirement.
In this case, different variables are multiplied by specified factors.
This includes the annual gross income compared to the average income in Germany, the number of years of work, the pension factor, the access factor and the current pension value.
This results in the following calculation:
The pension formula
Pay points x access factor x pension type factor x current pension value = monthly pension amount
But what do the individual variables and factors mean?
According to the German Pension Insurance (DRV), the access factor takes into account surcharges and discounts, for example in the event of early retirement.
Without any surcharges or discounts, the access factor is 1.0.
The pension type factor is also specified by law and varies depending on the type of pension.
Old-age pensions or pensions due to total disability have a pension type factor of 1.0.
With a gross salary of €3,500 per month – that’s how much is left in your pension
The pay points
are determined again year after year by comparing your own earnings with the average earnings of all insured persons.
For example, according to the DRV, the average earnings in Germany in 2024 will initially be 45,358 euros.
So if you earn the same amount gross per year, you will receive exactly one salary point for your pension.
In 45 years you will have collected 45 earnings points.
The salary points are therefore calculated using the gross income per year, divided by the annual average income.
The current pension value is adjusted annually to reflect the economic situation.
According to the German Pension Insurance, this is currently (as of February 2024) at 37.60 euros - for both western and eastern Germany.
What will the future pension look like?
The pension formula provides information about the gross pension.
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Example calculation shows: This is how much you have to earn throughout your life to get around 2000 euros in pension
Based on the average earnings in Germany in 2024 (45,358 euros) and the value of 1.0 for the access and pension factor as well as the current pension value of 37.60 euros, the following amounts result:
Monthly salary (gross) |
Monthly pension after 45 years of work |
|---|---|
€1500.00 |
€671.46 |
€2000.00 |
€895.28 |
€2500.00 |
€1119.10 |
€3000.00 |
€1342.92 |
€3500.00 |
€1566.74 |
€4000.00 |
€1790.56 |
€4500.00 |
2014.37 € |
The calculation was made under the simplified assumption that gross income and average earnings do not change over the entire period.
The standard pension level in comparison
According to
allianz.de,
the pension level provides information about how the relationship between the standard pension and the average income is reflected when working for 45 years.
This has fallen significantly in Germany since 2000: “The level has fallen sharply in recent years.
While it was 52.9 percent in 2000, it was only 51.6 percent in 2010.
However, since 2014 it has stabilized at around 48 percent.”
However, this does not mean that if the pension level falls, the pension actually paid out will also be lower.
According to the insurance group's experts, the gross pension will continue to increase: "Pensions will continue to rise in the future due to pension increases, but not as much as incomes." You can find out here whether your salary will make you one of the richest pensioners in Germany in the future.
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mh
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