As of: January 31, 2024, 11:16 a.m
By: Fabian Hartmann
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Many pensioners in Germany are dependent on additional financing.
But when is the pension enough to cover living expenses?
Munich – According to current forecasts, pensions could rise by 3.5 percent this year.
But many people's pensions are currently barely enough to cover their living expenses.
According to calculations by the Federal Statistical Office upon request from Bundestag member Dietmar Bartsch (Die Linke), 42.3 percent of pensioners in Germany have to get by with a monthly net income of less than 1,250 euros.
This affects around 7.5 million retired people, including more than 5.2 million women.
With a total of 26.4 percent of pensioners, one in four receives less than 1,000 euros in pension per month.
Here, too, there are more women than men: 36.2 percent of female pensioners are entitled to less than 1,000 euros per month, and 13.9 percent of pensioners.
According to the German Pension Insurance Pension Atlas 2023, men received an average gross pension of 1,728 euros in 2022.
Women received an average of 1,316 euros.
And the number of pensioners who received basic security in 2023 also increased compared to the previous year.
Despite decades of work, a large proportion of pension recipients have to live on a comparatively low pension.
To avoid this, it is important for employees to take care of their retirement provisions early enough.
It is always advisable to take a look at the current salary, which is known to be a factor in the amount of the pension.
But how much should you earn at least in order to be provided for in old age?
And for whom is which type of pension most suitable?
This allows employees to calculate their potential pension
The pension formula of the German Pension Insurance can help to estimate what pension level employees can expect in old age.
It is composed as follows:
monthly pension amount = earnings points x access factor x current pension value x pension type factor.
Pay points
are the most important value of the calculation.
They depend on the income level of the employees.
For this purpose, individual incomes are compared every year with the average gross annual salary of all people who pay contributions into the German pension fund.
A salary point of 1.0 corresponds exactly to the gross average salary.
If you earn twice as much as the average, your salary point is exactly 2.0.
In 2023, the annual average salary was 43,142 euros in the west and 41,967 euros in the east.
The access factor is between 0.86 points and 1. The earlier the retirement age, the lower the factor is.
The current pension value is the equivalent value, which corresponds to one earnings point.
It will be adjusted to the economic situation - in West and East Germany it is currently the same at 37.60 euros.
On the other hand, the pension type factor is fixed: It determines the security objective of the pension type in relation to a retirement pension and is between 0.1 and 1. For example, for old-age pensions and pensions due to full incapacity, the factor is 1. For pensions due to partial incapacity, it is 0.5 and with half-orphan's pension 0.1.
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How high the salary should be in order to be provided for in retirement
Whether the pension is sufficient to cover living expenses depends on several factors.
In addition to the type and age of pension, this also includes price developments, the situation on the housing market and energy prices.
But savings and additional forms of retirement provision can also contribute to a secure living in old age.
For better orientation, the pension insurance company sends employees an up-to-date pension status every year.
This lists the pension you can expect, provided you continue to work as you currently do and pay contributions into the pension fund.
The pension amount already achieved is also mentioned.
Walkers on the beach on Usedom © IMAGO/dts news agency
Otherwise, you can also consult the German pension insurance pension formula.
An example: If you earn exactly the average salary of 43,142 euros over a 45-year working life in West Germany, you will end up with 45 pension points.
If one assumes neither additions nor deductions, the access factor is 1. And the pension type factor is also 1 if one assumes the old-age pension.
If you multiply 45 earnings points by the pension value of 37.60 euros, this results in a pension of 1,692 euros per month.
Which retirement provision is best suited for whom?
A Yougov survey commissioned by the insurance company Axa from September 2023 shows: one in three adults in Germany does not make any provisions for old age.
However, many pensioners in Germany are dependent on additional insurance.
But how do you find out which type of retirement provision is right for you?
Private pension insurance is considered a classic.
However, some experts now advise against it.
Because high costs, non-transparent investment models and low interest rates often make pension insurance unattractive.
“In the payout phase, the insurers calculate with such a high life expectancy that some pensioners have to be over 100 years old in order to get their money paid out,” explains Merten Larisch from the Bavarian Consumer Center to the
editorial network Germany
(RND).
The Riester pension, on the other hand, now has a bad reputation.
According to experts, this almost never leads to the promised return.
In addition, Riester offers predominantly do not cover the current inflation compensation.
However, employees still have a few other options for retirement provision, such as company pension schemes or purchasing additional pension points.