The Federal Cabinet has decided that the so-called basic pension should be paid from 01.01.2021. Now the draft law has to be submitted to the Bundestag for a vote – which, however, will very likely approve. After that, the way would be free for the new pension from 2021. In this expert article you will find out how exactly the basic pension works and who will primarily benefit from it. At the end we will also deal with a few critical voices.
Overview of the article
Concept of basic pension
The SPD, from whose ranks the idea of the basic pension comes, describes it with the following sentences:
The basic pension is about human dignity, as well as respect and recognition. Many people cannot live on their retirement pension despite decades of work and payments into the pension fund. If these people have only received a very low wage over a long period of time, the money is simply not enough to make a dignified living in old age. It is true that the so-called basic security can also be applied for here, but the affected people would not have more money than if they had not worked their entire life. To do this, savings would have to be used up until one is entitled to the basic security. According to statements by the SPD, this procedure is undignified and counted. In the end, performance should pay off for everyone, or in the truest sense of the word, should pay off.
Who benefits from the basic pension
The Federal Cabinet clearly stipulated which people should benefit from the basic pension and what the conditions for it must be.
- People with mini pensions who have been in the Pension funds have deposited. The years that one spent raising children or caring for relatives are also taken into account.
- If the monthly income as a pensioner is a maximum of 1,250 euros (single persons) and 1,950 € (married couples), then you receive the full premium.
Since women very often receive a lower pension than men, it can be assumed that women in particular will benefit from the new pension. Approx. 70% of the basic pension recipients from 01.01.2021 should be women.
How much is the basic pension?
There is no lump sum here that could be named. How much basic pension you get depends on how long you have paid into the pension fund or statutory pension insurance and how high your income was. A distinction is also made between whether you worked in the east or the west.
Here is an example that makes it a little clearer:
A saleswoman from Dresden who has paid into the statutory pension insurance for 39 years would receive a pension of € 746 in principle. With the basic pension, she would receive a supplement of € 195 and would then have a total pension of € 941.
How is the amount of the basic pension calculated?
As already mentioned above, the prerequisite for a basic pension is the achievement of at least 33 years of “basic pension”. So compulsory contribution periods, e.g. from employment relationships, care, child-rearing or periods of compulsory insurance for the self-employed.
The average earnings points are increased by a surcharge for these times. These are then called “basic pension assessment times”. In addition, with this surcharge, child-rearing periods with siblings born (from 1992) are also included in the calculation, which are rated higher due to simultaneity.
The earnings points for “basic pension assessment periods” are upgraded to a maximum of 0.8 earnings points (for a maximum of 35 years).
What evidence must be provided?
According to the SPD, no evidence of any kind has to be provided by those affected. The corresponding amount to which the pensioner is entitled is paid out automatically. This is done by exchanging data between tax offices and pension insurance.
Contrary to what the CDU / CSU demanded, the SPD did not want to have a bureaucratic test of “neediness” carried out, which in the end did not come to that.
How many entitled will there be?
Around 1.3 million pensioners will receive the basic pension. 70 percent of them will be women. This includes not only future retirees, but also those who are already today.
How is the basic pension financed?
A good and legitimate question. Because the money for the approximately 1.3 million pensioners has to come from somewhere. According to the SPD, there will be no increases in contributions through the basic pension. This should be financed by a higher tax subsidy in the pension fund alone. This higher tax subsidy would be available through the introduction of the financial transaction tax.
Criticism of the new pension
Of course, there are not all positive voices. Above all, there are critics in the ranks of employers, trade unions and employer-related institutions. We have put together a few critical opinions.
The basic pension causes serious injustice and does not make a targeted contribution to poverty in old age.Ingo Kramer, employer president
The process of calculating the basic pension is extremely complex and far fewer people will benefit from it than originally planned.Annelie Buntenbach, board member of the German Trade Union Confederation
The particularly needy, namely those with fewer than 33 years of contributions or long periods of unemployment, are still not entitled to a basic pensionJoachim Ragnitz, Ifo Institute
Your opinion on the basic pension?
Let us know in a comment how you feel about the basic pension. Long overdue concept or is it unfair and not well thought out?