Understanding and optimising my pension insurance: a comprehensive guide
27.05.25
9
Minutes
Katrin Straub
Managing Director at nextsure
The statutory pension insurance forms the foundation of retirement provision in Germany, yet many questions often remain unanswered. This article explains the most important aspects of your pension insurance and shows how you can actively help shape your entitlements.
The topic in brief and concise terms
The statutory pension insurance (GRV) is the basis of retirement provision in Germany and is financed on a pay-as-you-go basis.
Your annual pension information provides an overview of your accrued entitlements and helps identify any potential pension shortfall at an early stage.
In addition to the state pension, private and occupational pension provision are important building blocks for securing your standard of living in retirement.
Understanding the basics of your pension insurance
The statutory pension insurance (GRV) in Germany is a branch of the social security system and primarily serves as retirement provision. In addition to old-age pensions, it also provides pensions in the event of reduced earning capacity and survivors' pensions. Financing is mainly through a pay-as-you-go system, supplemented by federal subsidies, which cover around thirty per cent of expenditure. Many insured persons underestimate the importance of the annual pension statement for their financial planning. You receive the pension statement for the first time at the age of 27, provided you have five years of contributions. It provides information about accrued entitlements and the projected pension amount. Knowing these figures is crucial in order to identify a possible pension gap at an early stage and take countermeasures. The GRV also has a social balancing function, for example through the crediting of child-raising periods.
The statutory pension system is based on the so-called generation contract. This means that the contributions of those currently in work finance the pensions of current pension recipients. Your own contributions at the same time establish your future pension entitlements. The amount of your later pension depends largely on the number of earnings points you have accumulated (often also called pension points). For an average income, you receive about one earnings point per year. If you earn more or less, you receive correspondingly more or fewer points. The current pension value, which is adjusted annually, multiplied by your earnings points and other factors, gives your monthly pension. In 2024, the current pension value is 39.32 euros. This mechanism ensures that pension development tends to keep pace with wage development.
Your pension information: A key to your retirement provision
The pension statement you receive annually from the German Pension Insurance is an important document. It contains not only a projection of your standard retirement pension, but also information about the pension in the event of full reduced earning capacity. Check the insurance periods shown carefully for completeness and accuracy. Missing periods can reduce your later pension. From the age of 55, you receive a more detailed pension statement every three years. These documents are the basis for your personal retirement planning. They show you whether the statutory pension will be enough to maintain your standard of living in old age. Often, additional private or occupational pension provision will be necessary to close the so-called pension gap. The pension statement usually also points out the loss of purchasing power due to inflation and provides projections based on assumed pension increases of one or two per cent.
The pension statement lists various amounts:
Your current entitlement to a pension due to full reduced earning capacity.
The amount of your retirement pension if you were to stop paying contributions from now on.
A projection of your standard retirement pension, based on the assumption that you continue to earn as much as the average over the last five years.
Forecasts with example pension increases of one and two per cent.
These figures are estimates and provide guidance. Your actual pension may differ due to various factors such as changes in legislation or changes in your working life. Use this information to take action early. For example, you can increase your pension entitlements through voluntary additional contributions or build up private provision.
Earnings points, access factor and pension type factor: The building blocks of your pension calculation
The calculation of your statutory pension follows a clear formula, set out in Section 64 of SGB VI. The monthly pension is the result of multiplying your personal earnings points, the access factor, the pension type factor and the current pension value. You accumulate personal earnings points throughout your working life through contributions. The amount of earnings points depends directly on your insured income in relation to the average income of all insured persons. One earnings point is awarded for the average income (2024: 50,293 euros). For example, someone who has paid the maximum contribution for 30 years could have accumulated around 58 points. The access factor takes into account whether you claim your pension early with deductions (factor less than one) or later with bonuses (factor greater than one). At normal retirement age, it is one. The pension type factor depends on the type of pension: for old-age pensions it is 1.0, for the full reduced earning capacity pension also 1.0, for the small widow's/widower's pension 0.25 and for the large one 0.55 (or 0.6 for older cases). The current pension value is adjusted annually and has been 39.32 euros nationwide since 1 July 2024. Another important role is played by account clarification to ensure that all pension-relevant periods are recorded correctly.
An example to illustrate the pension calculation: suppose you have accumulated 40 earnings points, retire at the normal age (access factor 1.0) and apply for an old-age pension (pension type factor 1.0). With a current pension value of 39.32 euros, your monthly gross pension would be 40 times 1.0 times 1.0 times 39.32 euros = 1,572.80 euros. From this gross pension, contributions to health and long-term care insurance, and possibly taxes, are still deducted. The contribution assessment ceiling (2021 West: 7,100 euros/month) caps the amount of income on which contributions are paid.
Voluntary contributions and special periods: actively shaping your pension
You have various ways to actively influence your statutory pension. One of them is the payment of voluntary contributions. This can be useful if you are not compulsorily insured, for example as a self-employed person without an obligation to insure or as a German living abroad. Voluntary contributions can help you meet the minimum insurance period of five years or offset pension reductions. The amount of voluntary contributions can be chosen within minimum and maximum limits. In 2025, the minimum contribution is EUR 100.07 and the maximum contribution is EUR 1,497.30. Pension points are also credited for periods spent raising children. For children born before 1992, this is up to two and a half years; for children born after 1992, up to three years. These periods must be applied for with the German Pension Insurance scheme. Periods of unemployment during which you receive unemployment benefit I also count towards your pension, with contributions calculated on the basis of eighty per cent of your previous gross salary. No pension points are accrued for periods of receiving unemployment benefit II. Also consider whether a state-subsidised Riester pension or a Rürup pension could be an option for you to supplement your retirement provision.
Further important aspects are:
Minimum insurance period (waiting period): To be entitled to the standard retirement pension, you must have paid into the pension insurance scheme for at least five years (60 months).
Credited period for reduced earning capacity pension: If you are no longer able to work for health reasons, a credited period is taken into account when calculating the reduced earning capacity pension, as if you had continued working until the standard retirement age.
Additional earnings limits: If you receive a reduced earning capacity pension or an early retirement pension, there are additional earnings limits that must be observed. In 2023, the limit for full reduced earning capacity was EUR 17,823.75 per year.
Old-age pension for those insured for particularly long periods: Anyone who can prove 45 years of contributions may, under certain circumstances, retire earlier without deductions.
These rules show that the statutory pension insurance system is more flexible than many people assume, and takes account of different phases of life.
Expert insight: Current rulings and legal foundations of your pension insurance
The statutory pension insurance is regulated in Book Six of the Social Code (SGB VI). This book forms the legal basis for all aspects of your pension insurance, from the requirements for entitlement to a pension through to calculating the pension amount. Our expert tip: keep your insurance documents up to date at all times and apply for an account clarification in good time to close any possible gaps at an early stage. The German Pension Insurance is the responsible provider and is divided into regional providers and the federal provider. Current court rulings can influence the interpretation and application of SGB VI. For example, the Federal Social Court (BSG) ruled that the German Pension Insurance must examine carefully, in cases of recovery claims, why it is pursuing a particular debtor (case no. B 5 R 2/22 R). Such decisions strengthen the rights of insured persons. Questions concerning the crediting of voluntary contributions for the basic pension have also already been the subject of judicial clarification (BSG ruling on voluntary contributions and the basic pension). It is important to know that the pension information you receive each year, while providing useful guidance, is not legally binding. The legally binding decision is the pension notice you receive after submitting an application. For comprehensive advice on your pension situation, the information and advice centres of the German Pension Insurance as well as independent pension advisers are available to you.
Important sections in SGB VI include:
§ 43 SGB VI: pension due to reduced earning capacity.
§ 46 SGB VI: widow's pension and widower's pension.
§ 50 SGB VI: standard old-age pension.
§ 64 SGB VI: pension formula.
§ 109 SGB VI: pension information and pension statement.
§ 210 SGB VI: refund of contributions.
The complexity of pension law often makes it difficult for laypeople to keep track of all the details. That is why an early and regular engagement with your own pension insurance is essential. Understanding the tasks of pension insurance helps you to better understand the system.
Private and occupational pension provision as a supplement to the state pension
Statutory pension provision often only provides a basic level of support in old age. To maintain your usual standard of living, additional private or occupational retirement provision is essential for many people. Private pension insurance offers individual options and potentially higher returns, but it also involves costs and investment risks. There are various forms, such as classic pension insurance, unit-linked variants or state-subsidised products such as the Riester pension and the Rürup pension. Our expert tip: Analyse your personal situation and risk tolerance before deciding on a product. Occupational pension provision (bAV) is another important pillar. Employees have a legal right to deferred compensation, whereby parts of gross salary are channelled into a bAV with tax and social security advantages. Since 2019, employers have been obliged to contribute a subsidy of at least fifteen per cent if they save on social security contributions. There are five implementation routes for the bAV: direct pension commitment, support fund, direct insurance, pension fund and pension scheme. Each form has specific advantages and disadvantages in terms of security, return opportunities and tax treatment. Careful review and advice, for example from us at nextsure, will help you find the right strategy for your additional retirement provision.
The benefits of additional retirement provision are diverse:
Closing the pension gap: The difference between your last net income and the statutory pension can be significant.
Tailored to your needs: Private and occupational solutions can be customised to personal requirements.
State subsidies: Riester and Rürup pensions, as well as parts of the bAV, are eligible for state allowances or tax advantages.
Capital option: Many private pension policies offer a choice at the end of the term between a lifelong pension and a one-off capital payment.
Early planning and combining different forms of retirement provision is the key to a financially secure future.
The process of dealing with your own pension insurance and additional retirement provision can seem complex. But with the right information and planning, you can set the course for a financially secure future. Use the annual pension information as a starting point for your considerations and check your insurance history regularly. The German Pension Insurance offers free online services through which you can view your insurance account and request documents. For individual advice, the information and advice centres of the German Pension Insurance are at your disposal. Independent pension advisers or specialist insurance portals such as nextsure can also help you analyse your situation and find suitable solutions. Bear in mind that there is no single perfect solution for everyone. Your optimal retirement provision strategy depends on your individual life situation, your financial goals and your willingness to take risks. The difference between a pension insurance and a life insurance policy should be clear to you. Start planning early – it pays off. We at nextsure will be happy to assist you in checking your insurance situation free of charge and receiving concrete suggestions for optimisation.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive concrete suggestions for optimisation.
More useful links
German Pension Insurance offers the download of the Pension Atlas 2024, a comprehensive statistical publication on statutory pension insurance.
Federal Statistical Office (Destatis) provides information on deaths and life expectancy in Germany, relevant data for pension forecasting.
Federal Ministry of Labour and Social Affairs (BMAS) offers insights into the pension insurance report, which highlights the development and prospects of pension insurance.
German Pension Insurance offers a brochure entitled "Retirement provision today – planning for the future", which contains valuable tips on provision.
German Pension Insurance provides an online calculator that allows you to determine your possible retirement age and pension amount.
Federal Statistical Office (Destatis) provides statistics on the number of people insured under the statutory pension scheme in Germany.
Federal Agency for Civic Education (bpb) offers well-founded information on pension policy and its social impact.
FAQ
When will I receive my first pension information statement?
You will receive your first pension information once you are 27 years old and have at least five years of contribution periods stored in your pension account.
What is the difference between the small and large widow’s pension?
The small widow's/widower's pension amounts to 25 per cent of the deceased person's pension and is usually paid for a maximum of 24 months. The large widow's/widower's pension amounts to 55 per cent (or 60 per cent for legacy cases) and is paid indefinitely if certain conditions are met (e.g. age, child-rearing, reduced earning capacity).
Can I make voluntary contributions to the statutory pension insurance?
Yes, under certain conditions, you can make voluntary contributions, for example to close gaps, meet the minimum insurance period or increase your later pension.
What does salary conversion mean in occupational pension provision?
With salary sacrifice, parts of your gross salary are paid directly into an occupational pension contract. This means you save tax and social security contributions.
What is the current pension value?
The current pension value has been 39.32 euros nationwide since 1 July 2024. It is adjusted annually.
What are non-insurance benefits?
Non-contributory benefits are tasks that the pension insurance assumes in the interests of society as a whole, but which are not covered by the insured persons' contributions (e.g. parts of child-rearing periods, pensions for resettlers). They are financed by federal subsidies.
