Contributions made voluntarily do not qualify as the fundamental, mandatory pension.
Retiree's Basic Pension Claim Denied: Here's Why
A retiree from Baden-Württemberg took the German Pension Insurance to court over their rejection of his application for a basic pension supplement. The court, following lower courts' rulings, dismissed his appeal as compulsory and voluntary contributions were treated differently.
The retiree, being self-employed, made numerous voluntary contributions. However, the Social Court of Mannheim and Baden-Württemberg State Social Court, like the Federal Social Court in Kassel, asserted that voluntary contributions could not be considered for the basic pension periods.
In the retiree's defense, he argued that his voluntary contributions significantly contributed to the funding of the statutory pension insurance and thus entitled him to proper old-age security like compulsorily insured individuals.
Inequality Justified
The Federal Social Court (BSG) followed the assessment of the lower courts and upheld the decision. According to the 5th Senate, neither constitutional law nor the general principle of equality was violated by treating compulsory and voluntary contributions differently in the statutory pension insurance.
The court pointed out significant differences between the two groups in the pension insurance. Unlike compulsorily insured individuals, the amount and payment terms of voluntary contributions are at the discretion of the contributors. In contrast, compulsorily insured individuals have obligations that are tied to their employment, contributing regularly to the system's financing.
Pension Disparities
Before the introduction of the basic pension supplement, most voluntarily insured individuals only paid the minimum amount, while compulsorily insured individuals, the largest group in the system, contributed significantly more in terms of contribution time, density, and amount. The court concluded that it was not prohibited for the legislator to treat the two groups differently in the statutory pension insurance.
Basic Pension: A Supplement for Low-Income Retirees
Introduced in 2021, the basic pension serves as an additional pension supplement for retirees who have worked for a long time and have relatively low earnings. As of the end of 2023, approximately 1.27 million pensions nationwide received this supplement, amounting to an average of 92 euros each. This represents around 4.9 percent of all pensions.
In the German statutory pension system, compulsory contributions are mandatory for most employees, ensuring a basic level of pension coverage. Individuals can choose to make voluntary contributions to further increase their pension amount. While voluntary contributions enhance the pension amount, they do not alter the duration of the basic pension period, as it is primarily determined by the number of years of compulsory contributions, along with other factors like age and employment history. This distinction ensures the pension system's core structure while offering individuals flexibility in enhancing their retirement income.
The retiree, being self-employed and having made numerous voluntary contributions towards the statutory pension insurance, argued that the disparity in treatment between compulsory and voluntary contributions was unjustified, affecting the principle of equality in finance and business. However, the Federal Social Court upheld its decision, stating that the differences between the two groups in the pension insurance, especially the discretionary nature of voluntary contributions, justified the legislator's decision to treat compulsory and voluntary contributions differently in the statutory pension insurance.
