Unemployed and No Work History? Here's Your Pension Situation
Unemployment compensation: Amount given when no contributions made - Retirement income without employment: determining benefits for uncontributed funds
Written by Matthias UrbachApprox. Read Time: 3 minutes
Let's get real: If you've never held a job, you can't expect to receive a pension. But hey, don't worry, the government has got your back!
While there's a twist for parents who've raised more than one child—let's call it the Parental Pension Claim—the majority of us will have to rely on other means.
If you can't work and aren't retired yet, you might be eligible for the Citizen's Allowance (previously known as "unemployment benefit II" or "ALG II," colloquially known as "Hartz IV"). This benefit is for those who are able to work but haven't landed a job yet. For all others, there's the so-called Basic Security.
When Your Pension Falls Short
Basic Security, in a way, is like a pension for those who haven't saved enough for retirement or haven't made other retirement arrangements. The German Pension Insurance suggests you consider Basic Security if your monthly income is less than 1062 euros.
The conditions for Basic Security and Citizen's Allowance are pretty similar, and you'll have to apply for either at your local social welfare office. Interestingly, you can also submit a Basic Security application at the pension insurance, who will then forward it to the social welfare office. If granted, you'll receive it for 12 months, but remember—you'll need to reapply every year.
You've Got Assets, But Are They Countable?
The state requires recipients of Basic Security to exhaust their assets before receiving benefits. However, here's the catch: Cash up to 10,000 euros, appropriate household goods, personal heirlooms, a house or apartment that's appropriate given the state's contribution to maintenance, and even maintenance payments, rental income, interest, life insurance, or widow's pensions are all factored into your eligibility.
Parents and Children: Maintenance Obligations
If parents or children earn more than 100,000 euros gross, they may be called upon for maintenance payments. Although recipients don't need to completely deplete their assets to qualify for Basic Security, this value cap does apply.
Pension for Parents: The Child-Rearing Exception
As mentioned, parents can claim a pension even without any professional work experience—we're talking about the so-called child-rearing periods. Each child grants one parent three pension years, usually the mother. For children born before 1992, it's only two and a half years. With five years, you're eligible for a pension. The German Pension Insurance calls this the waiting period.
Two elements to remember: An application is necessary—the pension insurance calls it the account clarification. Also, the pension years are only available as long as neither parent has other childcare claims (like being a civil servant).
The null and void child-rearing periods are valued at around one contribution point, equivalent to having earned almost the average wage. While it's enough for four child-rearing periods (12 years) to get a pension greater than Basic Security, it still falls short of a comfortable retirement income. As of April 2024, the maximum amount for a parent who's never worked is 451 euros per month for four children. For more details, visit the DRV website.
Lastly, don't forget about the numerous financial support systems available for parents who've raised multiple children, such as Elterngeld (parental allowance), Kindergeld (child benefit), Kinderzuschlag (child supplement), and Kinderfreibetrag (child allowance). Googling the German terms will provide more information on each benefit.
Tags:Basic SecurityPensionChildrenGerman Pension InsuranceDRVRetirement ProvisionPension Claim
- To supplement one's income during retirement, one could consider vocational training to acquire new skills and potentially land a job, leading to a more substantial pension.
- In addition to the Parental Pension Claim for parents who've raised multiple children, it's essential to take advantage of various health-and-wellness programs to maintain overall well-being and financial health, such as regular medical check-ups and proper wealth-management for personal-finance management.
- For those who've received a widow's pension, it's important to explore science-based vocational training opportunities to diversify income and build a foundation for long-term wealth management and wealth accumulation.
