Credits for Time Spent Bringing Up Children and Pension Splitting
Many mothers and fathers limit their employment in order to dedicate themselves to looking after and bringing up their children.
Periods Spent Bringing Up Children in Pension Insurance
Insurance periods not only include those periods during which contributions were made (contributory periods); time spent bringing up children also counts as insurance periods. Time spent bringing up children is principally credited to the parent who actually and predominantly brings up the child.
In pension insurance, up to four years (48 months per child, and 60 months in cases of multiple births) are credited as time spent bringing up children. This arrangement closes gaps in people’s insurance record and increases their subsequent pension entitlement. For time spent bringing up children, a contribution base of €1864.78 per month (2019) is used and is credited to the person’s pension account. This figure is adjusted annually (increased).
No difference is made here between biological children, step children, adopted and foster children.
If time spent bringing up children overlaps with the birth of another child, the time spent bringing up the first child ends with the beginning of the time spent caring for the second child.
If a person is employed during the time spent bringing up children, this period is taken into account as a so-called simple insurance period. However, when the person’s pension is calculated later on, the contribution base set for the time spent bringing up children is added to that from employment.
Voluntary Pension Splitting
Since 2005 it has been possible to divide up a pension voluntarily. Here, the parent who works and is not predominantly dedicated to looking after the child(ren) can – for the first seven years – have up to 50 percent of their pension credit amount transferred to the pension account of the person who is predominantly looking after the child(ren).
A transfer of this kind can be applied for at the relevant pension insurance institution until the 10th birthday of the youngest child. This scheme was introduced in order to voluntarily compensate for the loss suffered by one parent due to their reduced employment by balancing the pension accounts of the two parents in this way.
How Much Can Be Transferred?
The transfer amount can be set for each individual year.
However, the following limits have to be observed:
- Only credits from employment can be transferred. Credits from insurance cover due to unemployment, sick leave, maternity leave or transitional benefit, military or alternative civilian service, bringing up children or voluntary insurance are not transferable.
- A maximum of 50 percent of the credit from employment can be transferred in each calendar year.
- Only so much can be transferred that in the pension account of the receiving parent the annual ceiling on insurable earnings is not exceeded.
- The transfer can take place as an amount or as a percentage of the credit. The permissible amount is calculated by the relevant pension insurance institution.
- Transfers are possible for a maximum of 14 calendar years.
What Do I Have To Do To Transfer Credits?
The transfer has to be applied for at the relevant pension insurance institution (the one with which the parent who is predominantly employed is insured) on the 10th birthday of the youngest child at the latest.
Before the transfer the insurance periods and credits for the respective calendar years must have been finally determined. It is necessary to wait for the income tax assessment. This is particularly the case with the self-employed.
You can initially make an informal application for the transfer and then hand in the agreement about the amount later on when all the necessary data is available. In addition, an agreement with the other parent on the transfer has to be concluded.
A transfer is no longer possible if one of the parents is already entitled to their own pension (old age pension, early retirement pension, corridor pension, pension for those in strenuous work, disability pension, invalidity pension) or a civil service pension.
An agreement which has been made is irrevocable as soon as the transfer has been made and official confirmation of it has been delivered. The transfer can then no longer be reduced or reversed. Application forms for the transfer of periods spent bringing up children (Übertragung von Kindererziehungszeiten) can be obtained from the relevant pension insurance institution.