With the basic pension, supplements of up to 500 euros per month are theoretically possible. Female employment histories in particular should be given greater consideration. But a closer look at pension mechanics shows that for many mothers the situation is different.

An example from the middle of society: After 35 years of working – partly part-time, partly with below-average income – a woman leaves with her own pension of 800 euros for retirement. There is also a basic pension supplement of 300 euros. Total: 1,100 euros.

The woman raised two children. According to the pension decision, the periods spent raising children increase your pension by around 244 euros. In fact, only around 30 euros are added. The reason: The Basic pension supplement In return, it will be reduced by around 214 euros.

The basic pension is effectively eaten up by the time spent raising children and reduced to a fraction of its actual value.

The pension math behind the effect

For every three years of child-rearing time, around three salary points are credited. One salary point currently corresponds to a monthly pension of 40.79 euros. This results in a pension entitlement of around 122 euros per child.

However, for mothers with an average of 0.4 to 0.8 earnings points per contribution year – i.e. typical basic pension biographies – up to 87.5 percent of this value is cannibalized by the surcharge calculation. In extreme cases, only 12.5 percent of the child allowance remains.

Instead of an additional 122 euros in monthly pension, around 15 euros effectively remain – 107 euros are wasted due to the system.

Two positive effects – but for whom?

To be fair, two aspects should be mentioned:

Firstly, some insured persons only reach the 33 to 35 years of pension law required for the basic pension supplement after the three-year child-raising period. However, it is often overlooked that the so-called consideration period up to the child’s 10th year also counts – without a comparable negative interaction.

Secondly, there are constellations in which periods of child-rearing actually increase the basic pension supplement – especially with very low earned incomes of an average of around 15,000 to 20,000 euros per year. In these cases, there can be a positive effect of up to 87.5 percent.

However, this only affects a comparatively small group. The majority of mothers entitled to basic pensions are affected by the cannibalization described.

What does the Federal Minister of Labor and Social Affairs say?

A research report commissioned by the Federal Ministry of Labor and Social Affairs has now come to the conclusion that the basic pension is designed precisely and reaches the intended group of people. Women in particular would benefit. The study commissioned by the Federal Ministry of Labor is based on microdata from the German Pension Insurance. The results show, among other things:

1. As the number of children increases, the probability of being entitled to a basic pension decreases.
2. The amount of the possible basic pension supplement before income is taken into account also decreases.
3. After income is taken into account, the probability of actually receiving the supplement is lower for one to three children than for those without children.

These findings show that child-rearing periods are systematically in tension with the basic pension.

What is striking, however, is that neither the ministry nor the authors of the study address the interaction between the basic pension supplement and child-rearing periods in depth – even though women were expressly the focus of the reform.

European legal dimension: indirect discrimination?

To what extent does the cannibalization of pension rights for mothers conflict not only with the sense of justice, but also with the law?

In May 2019, the European Court of Justice made it clear that indirect discrimination in pension calculations is also inadmissible. This already exists if a formally gender-neutral regulation in fact predominantly disadvantages members of one gender – unless it is objectively justified and necessary.

The case at that time was about discrimination against part-time workers in Spain. Since around 75 percent of the part-time workers were women, indirect discrimination was confirmed.

If one transfers this argument to the German basic pension, the question arises as to whether the disproportionate reduction in the supplement for typical female employment histories – characterized by part-time work and raising children – is legally tenable.

Need for reform in the basic pension?

The current calculation system is not a law of nature. The legislature could treat child-rearing periods separately when determining the supplement or exclude them from the reduction mechanism.

This would avoid a de facto devaluation of up to 107 euros in monthly pension entitlements per child.

If the basic pension is actually intended to strengthen female employment histories, it must prevent the parenting performance in particular from being largely neutralized as a result.

This should be a topic in the discussion about improving the basic pension.

The basic pension will come into force in 2021. Pensioners who have worked for decades with below-average income, raised children or cared for relatives should receive a higher old-age pension.