Skipping Out on Retirement Savings: What Happens If You've Never Worked?
- Written by Matthias Urbach
- Approximately 3 Min Read
Income for the Unemployed in Retirement: What's the Amount if there's no Professional Contribution? - Unemployed and seeking a pension: what's the amount when contributions have been neglected?
Let's be honest here: If you've never held a job, you won't snag a pension. However, there's an exception for parents who have raised more than one child. They're eligible for a pension claim since the pension insurance acknowledges child-rearing work. Let's dive into the details below.
The state takes care of its residents who can't support themselves. They may be entitled to the citizen's allowance (formerly "unemployment benefit II", briefly "ALG II" or colloquially also "Hartz IV"). The citizen's allowance is offered to those who are able to work but haven't hit retirement age yet. Everyone else can apply for the so-called basic security.
So Long as Your Pension Falls Short, Claim Basic Security
Consider basic security as a sort of retirement plan for those who haven't saved enough to live on their pension earnings or haven't otherwise prepared for retirement. The German Pension Insurance suggests that if you require 1062 euros or less per month to live, it's wise to check your eligibility for basic security.
Basic security shares similar conditions with the citizen's allowance and both must be applied for at the social welfare office where you reside. In some cases, applications can be submitted directly to the pension insurance, which then forwards the application to the social welfare office. If granted, basic security is paid for a period of twelve months. Thus, the application must be re-submitted every year.
Maintenance Obligations for Parents and Children
The state ties the social benefit to the recipient first exhausting their assets. Moreover, parents or children can be obligated to provide maintenance if they earn more than 100,000 euros gross.
Basic security doesn't require the recipient to completely deplete their assets: Cash up to 10,000 euros, reasonable household items, and personal heirlooms whose value exceeds their monetary worth are excluded. A house or apartment is also exempted, provided it is proportional to the state's contribution to maintenance.
It's worth noting that not only assets but also any income is taken into account when evaluating eligibility. Since we're assuming here that someone has never worked, here's a quick rundown: Maintenance payments, rental income, interest, life insurance payouts, or widow's pensions all impact the claim.
The German Pension Insurance has published a brochure detailing the ins and outs of basic security. [Here's the link to download the PDF.]
Parents Often Qualify for a Pension Claim
Just as parents can secure a pension claim despite no professional employment, they can do so during their child-rearing years. These so-called childcare periods earn parents one pension year per child, usually credited to the mother.
If the child was born before 1992, only two and a half years of pension time are granted. Those with five pension years have already accrued a pension claim; the German Pension Insurance (DRV) refers to this as five years of "waiting time." It's essential to mention: Applying for the pension is necessary - the pension insurance refers to this process as the "account clarification." This doesn't happen automatically.
Maximize 450 euros per Month with Four Children
The one pension year per child can only be claimed by one parent at a time. However, parents can share the "waiting period" amongst themselves. It's about who primarily takes care of the child. The pension years are valid as long as they do not have other child-rearing responsibilities (such as public sector employees).
Child-rearing years are valued at around one contribution point. This means that, although the value is equivalent to someone who earned close to the average wage, even four child-rearing years (12 years) aren't enough to receive a pension claim that surpasses the basic security limit. The pension insurance pays a maximum of 451 euros (as of April 2024) to a parent who hasn't worked, for four children. [For more details, check out the DRV.]
- Basic security
- Pension
- Children
- German pension insurance
- DRV
- Retirement provision
- Pension claim
- Parents who have raised more than one child are eligible for a pension claim, recognizing their contributions as work.
- If one's pension is insufficient to cover living expenses, they may claim basic security, a form of retirement support offered by the German Pension Insurance.
- The German Pension Insurance offers a brochure detailing the process and conditions for applying for basic security.
- A parent who hasn't worked can receive a maximum of 451 euros per month from the German Pension Insurance for four children, but this amount may still fall below the basic security limit.
