Public pension in Germany: Everything you need to know about it

Germany's public pension: a general overview

Do you live in Germany and work as an employee? Then you are also compulsorily insured in the German state pension plan as virtually all employed people in Germany have to pay into the public pension system, known as the 'Gesetzliche Rentenversicherung', or GRV for short.

The public pension's standard retirement pension age is currently 65 and nine months, and it will gradually increase to 67 by 2029. So, when you are born after 1964, you must work until you are 67 to get a public pension without deductions.

The German public pension is a so-called pay-as-you-go system, which means that current employees pay for current retirees. Therefore, the pension will deteriorate as the number of pensioners grows rapidly compared to the number of working contributors. It is complex to predict how much you will actually get in retirement.

How much will my public pension be in Germany?

Your pension is determined foremost by the number of pension points (known as 'Rentenpunkte' in German, or official: 'Entgeltpunkte')you have collected. For every year of average income contribution, you earn one point. For the maximum contribution (at a salary of currently 8.050 € per month in West Germany), you earn precisely 1,92 points.

To calculate your German state pension, you must multiply these pension points with the current pension value or 'aktueller Rentenwert', which is currently 40,79 € (in East and West Germany in 2024). So when you pay about 30 years the maximum contribution and collect 58 points, you will earn a maximum pension of 2.365,82 € in the west per month. Your personal tax rate is then deducted from this pension.

Then there is the so-called entry factor or “Zugangsfaktor.” In essence, this number is 1. But if you retire early, it will be adjusted down (0,3 % per month), and if you retire later, it will be adjusted by 0,5 %. Each month, you do not receive a pension after reaching the standard retirement age.

Will my public pension in Germany keep up with inflation and general wealth trends?

If you ask whether your public pension will grow with the general inflation, the answer is Yes! As the public pension in Germany is paid by those working at that time, the contributions to the system and the potential payout automatically increased with the average wages. Since average wages grow faster than inflation, pensions should be able to keep up with inflation. In 2024, for example, the pension adjustment will be a solid 4,57 %, which should even compensate for the current high inflation.

However, this also means that if the population buildup worsens as fewer young working people pay for more pension-receiving old people, then the economics of the GRV will deteriorate. Wages typically rise about 1 % faster than inflation, but we expect this space to be used to offset the worsening economics of the public pension.

The bottom line: We expect that, as a result, pensions will keep up with inflation but not with the general living standard.

Where do I find the number of points I have already earned?

Every insured person who is at least 27 years old and has already paid into the German pension insurance scheme for five years is sent their official pension information (known as 'Renteninformation' in German) by mail annually. This information has circled each noteworthy piece of information you receive. Unfortunately, this overview is only available in German.

It includes:

1. The earliest date you can begin receiving your pension

2. Your pension amount if you received a full disabled pension

3. Your current entitlement to an old-age pension

4. Your projected pension entitlement if you were to continue earning the same amount as you do now and

5. The amount of your pension if you had an annual increase of 1 % or 2 %.

Please note: the values given in the pension information are static estimates based on today's figures. In reality, your pension may develop quite differently!

Our Pension Point Calculator shows how many points you have already accumulated

Voluntary contributions to the German public pension

Even if you are not compulsorily insured in the public pension, you can pay in voluntary contributions if you are older than 16 years and if one or more of the following points apply to you:

• Some self-employed and freelancers (note that registered craftsman and self-employed with one client are already compulsorily insured)

• German citizens living abroad

• Adults with either an unpaid job (i.e., child-raising) or one that pays too little for the insurance contributions threshold and

• Residents in the EU (including citizens and non-nationals) and those in countries with social security agreements with Germany if they have made at least one contribution to the public pension.

If you are part of this group, you can buy pension entitlement points by making special contributions. As a voluntary contributor, you can determine the number and size of your contributions freely, provided they are between the maximum and minimum contribution that applies for the year. Paying the maximum amount earns you just over 2 points. You can pay the amount up to 3 months after the end of the year.

You can also make additional contributions for other periods in special circumstances. For instance, for years, you received an education, but that did not count. You can make these contributions up to the age of 46.

Tip: If you are close to retirement age, it can make sense to contribute to the GRV if you can voluntarily. For those who live long (e.g., educated women) and those who are not so good at investing, this age starts earlier. In a few cases, when you are young, and you move to some countries outside the EU and are not a German citizen, it could be worth requesting a refund and investing it yourself.

Self-employed can voluntarily choose compulsory insurance

If you do not belong to the self-employed group that is compulsorily insured* in the GRV, you can opt to voluntarily enroll in this mandatory insurance ('freiwillige Pflichtversicherung'). However, the decision should be well-considered because once you are enrolled, the voluntary mandatory insurance is irrevocable.

You can choose between a fixed fee (standard contribution) or an income-dependent one. The standard contribution fee is 696,57 € per month in West Germany and 644,49 € in East Germany. You can also opt for half this fee within the first three calendar years after the year you start to work self-employed.

When you opt for the income-dependent contribution, you pay 18,6 % of your gross income in your last income tax assessment. In 2025, the minimum contribution is 100,07 €, and the maximum is 1.497,30 €.

Tip: If you are self-employed and have modest assets, the public pension may be a much better solution than the guaranteed insurance products on offer. Especially later in life (over 55), it can be worth it. The benefits of the public pension are that it pays your whole life, grows more or less with inflation, and incurs no cost! A private pension plan invested in a good mix of ETFs is a superior long-term alternative, especially for those starting earlier or having larger financial cushions.

* excluding craftsmen and home tradesmen, teachers, midwives, educators, persons employed in nursing, artists, and publicists, self-employed persons with one client, maritime pilots, and coastal boatmen and fishermen — these are compulsorily insured in their employers' liability insurance association.

Pension points for parents

Parents with young children often have difficulty earning good retirement points because at least one parent usually stays home for some time. To compensate for this circumstance, pension points can also be collected for parental leave:

You can earn half a pension point per child per half a year for up to 2 ½ years old if the child was born before 1992 and up to 3 years if the child was born after 1992. In principle, the points accrue to the mother, but parents can together declare that they should go to the father. For three kids, you can collect 9 points, which is quite substantive. You can only collect the points when the kids are raised in Germany and during the first 3 years. If you have two children in the 3-year period, then the period for the youngest child is extended by the overlap. For example, if child 2 was born exactly 2 years after the first child, you can claim points for child 1 in years 1, 2, and 3 and for the second child in years 4, 5, and 6.

The points can also be allotted to grandparents, provided they don't already receive a pension. As German public pension insurance does not usually know you are raising a child, you must report this yourself.

You can also collect the points when working, but only up to the maximum you earn each year (about 2).

For details, see this official brochure.

The minimum qualification period

To be entitled to a statutory pension, you must work in Germany for at least 5 years and pay into the public pension. If you do not meet this required minimum qualification period ('Mindestversicherungszeit' in German), you can seek a refund for your pension or contribute voluntarily.

To qualify for the five-year minimum, you can count the years that you contributed to (or otherwise qualified for) the official pension systems in all EU countries and those with a social security agreement with Germany. The official statement from the German pension fund is in this regard: “All insurance periods which you have completed in other member states and which do not overlap with German periods will be taken into account.”

When you can no longer work: Disability pension rights

Unfortunately, not everyone is lucky enough to stay healthy and able to work until they reach retirement age. Suppose you can no longer work due to an accident or illness. In that case, in Germany, you are entitled to a disability pension (called 'Erwerbsminderungsrente' in German or short: 'EU-Rente'), which is proportional to the regular pension that you have built up. So, if you already built up a nice entitlement to a basic state pension, you could rely on a state disability pension; otherwise, you cannot.

If you can only work three hours or less per day, you will receive a full disability pension. And if you can work between three and six hours per day, you will receive a partial disability pension, half of the entire disability pension. Your ability to work will be checked with medical records and attempted rehabilitation before pensions are given.

Note: This check is only about a general ability to work, not whether you can continue in your current job. You may be forced to take a job in a different field where you can still work.

You must have been insured with the public pension for five years of your life (these 5 years do not need to be contiguous) and paid pension insurance for 3 out of the last 5 years before the illness or disability request. And you must be under the regular retirement age to obtain such a pension. Whether you have a partial or a full disability pension determines your pension entitlement.

The amount of the state disability pension depends on your pension entitlement. The number of years of contributions to the German pension insurance scheme and the number of pension points accumulated are essential factors. The calculation of the disability pension also considers the period up to the statutory retirement age.

Your pension amount is multiplied by 0,5 if you have a partial disability pension and by 1 if you have a full disability pension. This factor is called the pension factor or 'Rentenfaktor' when calculating your pension amount.

If you are young or have not yet spent much time working in Germany, you will not have been able to accumulate many pension points. In this case, your disability pension will be increased by the so-called additional calculation period (called 'Zurechnungszeit' in German). Therefore, German pension insurance calculates the average value of your previous contributions from the beginning of your incapacity for work until you reach the regular retirement age. The fictitious pension points calculated in this way are then added to the calculation of your disability pension.

However, in most cases, the reduced earning capacity pension is insufficient to cover essential living expenses. On average, it currently amounts to only 830 €! It is, therefore, advisable to take out additional private insurance.

See this official page for more information.

Widow(er)'s pension

In Germany, there is also a widow(er)'s pension linked to the build-up size of the official state pension. For younger people, this is quite insufficient, especially if you have children and absolutely when there is just one income earner. Therefore, in these cases, you need to consider additional coverage by private life insurance. This is available at a low cost. See here for an article that provides insight into the size and cost of the insurance.

In old age, this widow's (er) pension can be helpful, especially because many women have a relatively low state pension.

In principle, you are entitled to the widow(er)'s pension if you married your spouse until they died. You would have to be married for at least one year unless your spouse died in a sudden accident, and shorter marriages are also taken into account. Your partner must also have paid at least 5 years into their pension insurance.

Note: Whether you lived together or separately is irrelevant. But if you were only engaged, lived together without marriage, or were only married religiously in Germany, you will not be entitled to a widow(er)'s pension.

There are two types of pension for a widow(er): the small and the large pension.

• You receive a small pension if you are younger than 47, and you are neither disabled nor without a child. The widow(er) receives 25 % of the deceased spouse's built-up pension for up to 24 months after death.

• You are entitled to a large pension if you are either older than 47, disabled, or raising a child either on your own or a child of the deceased who is younger than 18 years old (unless they are disabled, in which case their age is irrelevant). The widow(er) is, in this case, entitled to receive 55 % of their deceased spouse's pension until they die.

Accruing pension points in times of unemployment

Even with suitable qualifications and a high level of motivation, it can still happen that you are unemployed for a certain period of time. In this case, in Germany, you will not only receive unemployment benefits (if you meet the requirements), but you can also continue to earn pension points.

If you have paid at least 12 months into unemployment insurance within the past 30 months, and you, on this basis, receive the so-called unemployment benefit I, you accrue pension points based on 80 % of the gross salary you earned in the last 12 months. If you seek employment within Germany, you receive these benefits for up to 6 months. In contrast, if you are seeking a job in another EU member state, these benefits last up to 3 months after you become unemployed.

If you have contributed compulsorily for a longer time during the 5 years before claiming unemployment benefits, you could get these benefits for longer. However, how long you get such benefits also depends on your age:

If you can work and are unemployed but are not entitled to unemployment benefit I, you can apply for unemployment benefit II. In other countries, this would be called social welfare. It is “means-tested,” in this case, however, you do not accrue any points toward a pension.

For details, see this official brochure.

Pension rights for studying, mini and temporary jobs

For any job that lasts more than 3 months, including a mini job and student jobs, you accrue pension rights commensurate to your income. If your job started as a shorter-term one but is extended, it will still be treated as a longer-term job, and pension rights accrue. There are no longer any special exemptions for students: i.e., studying does not earn you pension points.

For more information, see this official website.

Tax and social security contributions to your state pension

We already mentioned it at the beginning: your personal tax is deducted from your public pension. Your tax rate in retirement will be different from during your employment:

Your actual net income during your working life and in retirement depends on your tax class, which is determined by your personal circumstances. Are you single, married, divorced, or widowed? Does your partner have his or her income? Do you have children? These factors determine your tax class and, thus, your personal taxation.
The following two sample calculations indicate that this can make a significant difference:

Can I retire early and still draw my public pension?

Of course, no one can force you to work until the standard retirement age of 67. You can retire earlier, but you must accept cuts in your statutory pension. If you want to stop working before 63 and have paid into the GRV for at least 45 years, you will receive a full pension at 63.

Another possibility is to retire early at 63, with deductions, given that you have worked for at least 35 years. Every month you intend to retire earlier costs a deduction of 0,3 percent on your monthly pension. To avoid this, you can make special payments before the official start of your pension from the age of 50. It makes sense to spread the special payments over several years to avoid exceeding your tax deduction limits.

So if your life expectancy (at 67) is the current average of 87, then you cut your pension for 20 years by 3,6 % to earn one year of pension. The break-even point between deciding on early retirement using your public pension option or not is a growth rate of 2,9 % in the public pension. In other words, if your public pension grows 2,9 % per year for 20 years, it returns you the same amount as your extra year of early retirement pension. The shorter your life expectancy, the more sense it makes to go for the early retirement option financially.

Close your pension gap with the Pensionfriend Pension Plan