As of: March 28, 2024, 9:58 p.m
By: Sofia Popovidi, Romina Kunze
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The risk of falling into poverty in old age is increasing in Germany. Basic pensions and basic security should counteract this. A financial expert explains the two models.
Syke – In Germany, older people are increasingly fighting against poverty. People over 65 in particular suddenly find themselves at the subsistence level in retirement. In 2021, the poverty risk rate for 65-year-olds was 28.1 percent, above the EU average (27.4 percent).
The basic pension and the basic security are two state safety nets in old age on which more and more pensioners are dependent. A financial expert uses scenarios on YouTube to illustrate what the lowest pension citizens can claim is.
A financial expert explains the basic pension in Germany using a sample calculation
Financial need can be defined differently in Germany. According to the portal
rentenbescheid24.de
, pensioners with less than 1,126 euros (net) per month are considered poor; this is the case for over 40 percent of all pensioners. Variable factors such as rent and cost of living can influence one's perception of poverty.
More and more seniors in Germany are at risk of poverty. A financial expert sheds light on the lowest possible pension on YouTube. (Symbolic image/montage) © Sven Simon/imago & imagebroker/imago
But there are ways to improve your pension; This includes the state models of basic pensions and basic security. An example calculation by the YouTuber “Finanztip” explains the principle of the basic pension in Germany.
In principle, 18.6 percent of the gross salary is paid into the statutory pension. These pension contributions are then converted into “earnings points” (EP), which the financial expert describes as the “currency” of the statutory pension insurance. The expert uses the following fictitious example to illustrate this:
A fictional woman named “Gisela” worked as a saleswoman for 40 years and earned an average of 0.72 EP (72 percent) per year.
In old age she will receive a statutory standard old-age pension of 1,082.88 euros gross. Millions of people in Germany feel the same way.
The average salary points of 0.72 that “Gisela” received per year will initially be doubled. This gives a total of 1.44 XP. However, since only a maximum of 80 percent of the average salary, i.e. 0.8 EP, can be taken into account for the basic pension, the woman is 1.44 EP above the value.
So by how many euros can “Gisela’s” pension be increased? She will be credited with 0.8 XP, but she has already earned 0.72. The difference is 0.08 EP, from which another 12.5 percent is deducted. This means that “Gisela’s” basic pension is calculated at 0.07 EP each for 35 years, resulting in a total of 2.45 EP.
She now gets this 2.45 EP on top of her small pension. So if you multiply the 2.45 EP by the 37.60 euros you receive for one pay point, you get a basic pension supplement of 92.12 euros per month.
This means: “Gisela” ultimately receives a total pension of 1,175 euros gross per month.
Source: YouTube “Finanztip”
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If the basic pension is not enough – basic security as the next step
At a time when rental costs are rising and food is becoming more and more expensive, 1,175 euros gross is just enough for many people to survive - if at all. “But even less is possible,” emphasizes the financial expert in his video clip. The expert uses a second hypothetical case to illustrate that there are situations in which even the basic pension is not enough and then the second security mechanism comes into play: the basic security.
A condition for basic security is that existing assets or a deposit must first be used up before you are entitled to financial support from the state. Another example from the financial expert:
“Michael” was a truck driver for 34 years and only earned an average of 0.55 XP (55 percent) per year.
This means he receives a statutory standard old-age pension of just 703 euros.
In addition to his standard pension, “Michael” receives a basic pension supplement of 56 euros. This results in a total monthly pension of 759 euros gross.
That's not enough for him to live on, which is why he is entitled to basic security.
The basic security is calculated as follows: On the one hand, “Michael” has housing costs of 400 euros, and on the other hand he also has a standard requirement (level 1) of 563 euros, which has been in effect since 2024.
“Michael’s” pension will be deducted from this. However, not his full pension, but only parts. In “Michael’s” case it is 450 euros that are deducted. This means: He can receive a total of 513 euros in basic security.
The statutory pension of 703 euros, the basic pension supplement of 56 euros and the basic security of 513 euros are now added together.
This means that “Michael” has a total of 1,273 euros gross per month in retirement.
Source: YouTube “Finanztip”
It turns out that poverty often brings with it another social problem: loneliness. Especially as they get older, people often retreat into isolation; mostly out of shame. An association wants to take action against this and help retired people out of trouble.
The editor wrote this article and then used an AI language model for optimization at her own discretion. All information has been carefully checked.
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