Guide to the Week Pension Insurance: What Children Bring for Retirement

• A job break until the child’s third birthday usually does little damage to the pension. Because the first three years of life are fully recognized as an insurance period for the parent (for children born from 1992).

The child-rearing period in terms of pension insurance ends when a child turns three. The time after that until a child’s tenth birthday is called "Children consideration time" counted.

Many young mothers only have a mini job. It is important for them: The upgrading of the employment time for the later pension also applies to mini jobs – but only as long as they are subject to pension insurance.

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Many mothers, in particular, have a shorter career path in favor of their children. This will also reduce their future pension. But when it comes to job planning, it’s worth it "children services" to keep an eye on pension insurance. The best known benefit is the so-called child-rearing period, through which a parent acquires pension rights in the first three years of life. This is what Part 1 of this dossier is about.

Part 2 is about the much less well-known times when children are taken into account. These often result in pension entitlements and, for example, play a major role in connection with the old-age pension for particularly long-term insured persons. However, in many cases they also bring a significant increase in pensions.

Parenting time

For every child that is currently born, the statutory pension insurance system calculates three years as compulsory contribution periods for one parent (usually the mother, but possibly also the father, more information on the assignment below). This applies to births since 1992. Parents whose children were born before 1992 will be recognized for two years of child-rearing, from 2019 it may also be three years at least for parents with three or more children (was not yet certain at the time this guide went to press).

The child-rearing period is also recognized not only for biological parents and adoptive parents, but also for foster parents and step-parents. This is regulated in Section 56 SGB VI, where there is a reference to Section 56 of the first Social Code. Paragraph 2 nos. 2 and 3 of this paragraph mention step-parents and foster parents.

The child rearing period begins on the first of the month after the birth of the child and ends after 36 months (for births from 1992).

The three-year pension plus per child also applies if children are born at short intervals. For example, if your first child was born in January 2012 and you have two more children in 2014 and 2015, you will receive child-rearing periods until January 2021 (a total of nine years).

The same calculation applies to twin or generally multiple births: there are three years of child-rearing for each multiple. The child-rearing period for twin births is extended to six years, for example.

The child-rearing period may bring entitlement to a pension even if there are no further periods under pension law. With today’s parents and generally with periods of upbringing from 1992 onwards, a pension entitlement already arises for a parent with two children (= 6 compulsory contribution years). With five years of compulsory contributions, you are entitled to a small old-age pension when you reach regular retirement age (which gradually increases to 67 years).

• Biallo tip: Parental leave also for chamber professions

The so-called chamber professions, i.e. pharmacists, architects, notaries and lawyers, are insured in the pension funds of their respective profession – and not in the statutory pension insurance. The pension schemes offer very good old-age pensions, but little in terms of child-rearing times – and some even nothing. However, according to a ruling by the Federal Social Court, the legislature has given the professionally insured, who are actually exempt from the statutory pension insurance obligation, the possibility of having their child-rearing periods recognized by the statutory pension insurance scheme.

This is always the case when professional insurance offers less than the statutory. In these cases there is something like one "Children’s pension" statutory pension insurance, but not automatically. The pension insurance does not know who is affected as a mother or father. In addition, it must be checked in each individual case whether the time spent bringing up children is actually rated lower in the respective pension institution than in the statutory pension insurance scheme.

Those affected must therefore submit an application for recognition of their child-rearing periods. However, this may not be enough to get a pension later. For this reason, those affected can also pay voluntary contributions to the statutory pension insurance for as many months as is necessary to cover a total of five years of insurance (also during the period in which they are covered by professional insurance).

In principle, it is sufficient to pay the minimum contribution for each individual month. Especially for those who are close to retirement age, it can be worth paying in significantly more.

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Pension plus through the times of bringing up children

The child-rearing periods count not only when it comes to fulfilling the waiting periods for the various old-age pensions and the disability pension, they also bring a pension plus. Approximately one earnings point is credited to the pension account each year. One year of child rearing leads to a monthly pension increase of (currently) EUR 32.02.

Explanation: One earnings point is currently worth 32.03 euros in the old federal states – 1 cent is missing from the full earnings point because 0.0833 earnings points are credited for each child-rearing period, which is then in the year (12 x 0.0833 =) 0. Makes up 9996 earnings points, i.e. slightly less than a full earnings point.

At present and in general for births from 1992 onwards, the following applies: If a mother has brought up three children and has not acquired any other periods under pension law during this period, she receives a monthly pension of EUR 96.06 for the period of child rearing. In the new federal states, bringing up children for one year according to the current pension value applies to a pension entitlement of 30.68 euros. Three years bring 92.04 euros.

For those who – like most current parents – will not retire until 2025 or later, the east-west difference is irrelevant, since from July 2024 the same pension values ​​will apply in east and west. The above-mentioned values ​​are adjusted annually anyway – the Federal Government expects an average adjustment of a good two percent annually in the coming decade.

Anyone who does not take a baby break at all during the upbringing, but works with social insurance, thereby acquires additional pension entitlements. Parental leave plus income from work can, according to current values, bring a maximum of around 2.06 earnings points per year, which, according to the current current pension value, results in pension entitlements of 65.97 euros per month, in the new federal states it is 63.21 euros.

• Biallo tip: Be careful when assigning child-rearing time to mother or father

Today it is no longer clear in every case that a mother earns little in the first years of her child’s life. If she has above-average income anyway, the child-rearing period may bring her little. Example: A mother of a two-year-old child generates income of 55,000 euros that is subject to social security contributions in 2018. On this basis, she pays contributions to the statutory pension insurance (half of which her employer participates in).

The contribution ceiling (west) of the statutory pension insurance in 2018 is 78,000 euros. The gap between her own income and this limit is 23,000 euros. In principle, one year of child rearing is currently rated as if the person concerned had achieved an average income.

According to the preliminary calculations, the average annual income subject to pension insurance in 2018 is EUR 37,873. If you add this value to the income of the example mother in 2018, the contribution ceiling will be exceeded by far. In this case, the pension insurance cuts the value of the child-rearing period under pension law.

The child-rearing period then only brings as much as an annual pensionable income of 23,000 euros would bring. Expressed in earnings points: The child-rearing period does not (almost) result in an earnings point, but only (23,000 / 37,873 =) around 0.607 earnings points.

In such a case, the parents should make a check calculation and check whether the child-rearing period can bring more to the father. Then he can take over the child-rearing period – in terms of pension law and irrespective of how the upbringing was actually distributed among the parents.

Also read: Mother-child cure – millions of mothers are entitled

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