More and more employees who retire before the normal retirement age are making voluntary contributions. In this way they avoid reduced pensions. How does it work and what amounts are to be paid.
The number of people making voluntary contributions to compensate for later pension reductions rose to around 35,000 in 2020. This emerges from the latest data from the German pension insurance. In 2017 only 11,600 insured persons made use of this option, in 2019 it was already 25,800.
With the flexible pension law from 2016, the possibility was created to fully or partially compensate for deductions from the age of 50 with a special payment. If you want to retire before you reach the statutory retirement age, you normally have to accept a deduction of 0.3 percent for each month earlier. This means that anyone who retires a year earlier loses 3.6 percent of their actual pension. And for life.
Another possibility of the law is the additional earnings for pensioners with an early old-age pension of up to 6300 euros per year. As a spokeswoman for the pension insurance explained, as a result of the corona pandemic, there is even an opportunity for additional income of up to 46,060 euros this year.
This generous scheme will be permanent. The traffic light parties wrote that in their coalition agreement. The lead Federal Ministry of Labor informed FOCUS Online when asked that the necessary steps will be taken in 2022.
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In addition, the pension can be increased through voluntary contributions. The law has also made it easier to work beyond the standard retirement age or to work in addition to the standard old-age pension.
Anyone who thinks about offsetting their pension deductions with extra payments as a future early retiree will get off particularly cheaply in 2022. In 2022, a so-called remuneration point (EP, often also called “pension point”) will cost 7235.59 euros. He brings a monthly pension of 36.02 euros (value from July 1, 2022). In 2021, the “price” of a pension point was still 7726.63 euros – around 491 euros more. The reason for the lower costs in the current year is the fall in average wages as a result of the Corona crisis. Calculation is based on them.
Assumption: 40 earnings points (EP) are required for an unreduced old-age pension. However, the insured wants to retire two years earlier. So he has to accept a discount of 24 months x 0.3 percent = 7.2 percent. His access factor (AF) is thus 100-7.2 = 92.8 percent = 0.928.
The average salary of all pension insured persons in 2022 is 38,091 euros (monthly 3174.25 euros). This value is the decisive variable for calculating the required compensation amount.
Invoice (with the values see “Acceptance”):
The calculation shows: The early retiree has to pay 22,455 euros into the pension fund to compensate for 2.88 EP. His extra payment brings him 103.74 euros more monthly pension. This value corresponds to 2.88 EP in the old federal states. However, the extra payment only has an effect from the point in time at which his regular retirement pension begins – so the money does not flow for the period of early retirement!
Roughly speaking, the 22,455 euros pay off for the early retiree after 216.45 months – that’s a good 18 years. As mentioned: The time is only running when the early retiree has reached his regular retirement age. For those born in 1956, that is an age of 65 years and ten months.
In fact, the threshold until the extra payment is worthwhile is well below 18 years of age – because future pension increases will also bring more pension for the extra payment points acquired. This plus can be significant: between July 1, 2012 and July 1, 2022, the value of an EP rose from 28.07 to 36.02 euros – i.e. by more than a quarter. If this development continues in the future, an early retiree with his extra payments will reach the point at which the investment pays off earlier.
In addition, the Treasury promotes the extra payments by making them tax-free. This leads to lower tax payments. However, the amounts are capped. In order to get a maximum tax advantage, those interested can spread the extra payments over five years. Early retirees can offset the tax saved against their extra payments.
The FOCUS Online Guide answers all important questions about pensions on 135 pages. Plus 65 pages of forms.