Unpaid contributors reap substantial pension benefits - Title: Cost of Perpetual Non-Payment Revealed
The German pension system has introduced a unique mechanism to acknowledge the value of child-rearing in the workforce. Known as the "Mütterrente" or "mothers' pension," this system grants pension entitlements to parents who have not worked but have raised children.
In this system, parents are credited with pension points for each child they raise. These points contribute towards their own pension claims. Recent reforms have further enhanced these benefits, particularly for parents who raised children born before 1992, by adding approximately €20 per child per month to pension amounts starting in 2027.
For parents who have not worked, they can still claim pension entitlements by proving they raised children. The state credits pension periods equivalent to certain insured work periods, recognizing child-rearing as pension-worthy time. Parents who have gaps in formal employment, for example due to childcare, can also make voluntary pension contributions to supplement their entitlements if desired, but this is optional.
It's important to note that the pension claim does not happen automatically and requires an application, known as the account clarification. Additionally, if a person has never worked, they will not receive a pension. Basic security, a retirement provision for those who have neither paid enough into the pension insurance to live on it, nor have otherwise provided for their retirement, is available for such individuals.
The system is designed to support parents, particularly mothers, who suspended or never had paid work due to childcare responsibilities. However, even four child-rearing years (12 years) are not enough to achieve a pension claim that exceeds the basic security.
Citizens who are generally able to work and have not yet reached retirement age receive citizen's allowance, previously known as "unemployment benefit II" or "ALG II," and colloquially known as "Hartz IV." This benefit is provided by the state to citizens who cannot support themselves.
In some cases, parents can divide the "waiting time" among themselves based on who primarily raises the child. For instance, each parent can claim three pension years per child, usually the mother. The German Pension Insurance pays a maximum of 451 euros (as of April 2024) for one parent who has not worked, for four children.
The German Pension Insurance has published a brochure on the details of basic security, which can be found at this link. It's also worth mentioning that parents or children can be called upon for maintenance if they earn more than 100,000 euros gross.
Lastly, it's crucial to note that both basic security and citizen's allowance conditions are similar, and both benefits must be applied for at the social welfare office at the place of residence.
- Despite not having a traditional work history, parents who have raised children in Germany can make voluntary pension contributions, a form of personal-finance management, to supplement their pension entitlements, particularly in the context of vocational training for a more substantial pension claim.
- In light of the German mothers' pension system, community policy recognizes the value of child-rearing in the workforce by offering wealth-management opportunities, such as vocational training, for parents who have not worked, thereby helping them to build long-term financial security.
