As of: April 5, 2024, 10:49 p.m
By: Carmen Mörwald
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Is the salary enough to retire without financial worries? The pension formula can help to calculate the individual amount.
Frankfurt – Thoughts about retirement often trigger financial worries. The statistics from the Federal Ministry for Family Affairs give little reason for hope. Accordingly, a total of 22.4 percent of people over 80 in Germany were affected by poverty in 2021. This means that more than a fifth had a maximum income of 1,167 euros per month available. As a calculation shows, this amount changes little if a gross monthly salary of 2,700 was previously received.
How much pension remains with a gross monthly salary of 2,700 euros? This is how it is calculated
In order to understand what the future amount will be in retirement, the so-called pension formula is essential. A brochure from the German Pension Insurance explains that this is made up of earnings points, the access factor, the current pension value and the pension type factor. The result of the calculation is the monthly pension amount. It is therefore not possible to say in general terms how much pension will be left over with a gross monthly salary of, for example, 2,700 euros.
Pension formula for old-age pension:
Monthly pension amount = earnings points x access factor x current pension value x pension type factor
When calculating, your own earnings – in this case 2,700 euros gross – are divided by the average salary of all employees, which results in the salary points for the respective year. The access factor takes into account deductions or surcharges at the time of retirement. The pension value of currently 37.60 euros determines the amount due per earnings point. The pension type factor, on the other hand, differs depending on the type of pension.
Pension type |
factor |
Pensions due to old age |
1.0 |
Pensions due to partial disability |
0.5 |
Pensions due to total disability |
1.0 |
Education pensions |
1.0 |
Small widows' and widowers' pensions |
1.0 |
After the “death quarter” |
0.25 |
Large widows' and widowers' pensions |
1.0 |
After the “death quarter” |
0.55 |
Half-orphan pensions |
0.1 |
Orphan's pensions |
0.2 |
Source: German pension insurance
A note: If you receive the classic old-age pension and retire at the standard retirement age, you can leave out the access and pension type factor when calculating the monthly pension you are entitled to.
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Example calculation: This is how much pension you are entitled to if you have earned 2,700 euros gross
In practice, consumers have to put their annual salary in relation to the German average income in order to calculate their annual earnings points, which they in turn need to calculate their pension. To simplify matters, it is now assumed that a gross monthly salary of 2,700 euros was earned over 50 years of working time - which is of course unrealistic. In this case, the gross annual income amounts to 32,400 euros.
The average gross salary of all insured persons for 2024 is 45,358 euros. According to the German Pension Insurance, the federal government determines this provisional value with the approval of the Federal Council. It relies on data from the Federal Statistical Office. In order to get the salary points, the quotient of the annual salary of 32,400 euros and the current average salary of 45,358 euros must be calculated - the result: 0.71.
There is often not much left of your original salary when you retire. The result is poverty in old age and social exclusion. © Bihlmayerfotografie / Imago
In the next step, the value of 0.71 is multiplied by the total working years. As mentioned, it is assumed that a gross monthly salary of 2,700 euros was received for 50 years. This results in 35.5 salary points. In the “pension estimator” provided by the German Pension Insurance, the value can only be rounded down to 35 or up to 40, which is why we have calculated the pension value using 35 earnings points.
The result: With a consistent monthly salary of 2,700 euros gross over 50 years, consumers who receive the classic old-age pension would receive a pension of 1,316 euros gross. That is almost 150 euros more than the maximum income of the 22.4 percent of those affected by old-age poverty in 2021. However, it is important to note that the value of 1316 euros can vary sometimes more or less depending on individual factors.
The sample calculation is summarized in a nutshell:
2700 euros monthly salary × 12 = 32,400 euros annual salary
32,400 euros annual salary: current average salary of 45,358 = 0.71 salary points
0.71 salary points × 50 years of work = 35 salary points rounded down
35 earnings points rounded down × current pension value of 37.60 euros = 1316 euros pension
In order to relieve the burden on future retirees, pensions are to be increased in the summer of 2024, taking wage developments into account. Nevertheless, there is increasing dissatisfaction because even if pensions are adjusted annually to reflect wage developments, this is unlikely to eradicate increasing poverty in old age. Individual politicians and associations are therefore calling for a further increase in the minimum wage to 14 euros per hour. This is the only way to earn a pension above the subsistence level.
(cln)