Current pension value: Definition and legal foundations
The term “Current pension value” plays a central role in German pension insurance law and is decisive for the calculation of the statutory retirement pension. The current pension value forms the basis for numerous claims under the statutory pension insurance system and finds its legal anchoring in the Sixth Book of the Social Code (SGB VI). This key figure determines the amount of monthly pension benefits for one earnings point at the relevant calculation time.
Statutory basis of the current pension value
Sixth Book of the Social Code (SGB VI)
The relevant regulations on the current pension value are set out in §§ 68 et seq. SGB VI. According to § 68 SGB VI, the current pension value is the amount that is decisive for the monthly pension benefit from one earnings point. An earnings point, in turn, represents the ratio of an individual’s income to the average income of all insured persons.
Explanation of the central regulations
The determination of the current pension value is closely linked to the pension adjustment formula in § 68 SGB VI. The value is reviewed annually and, if necessary, adjusted as of July 1 of each year. The exact amount and adjustments are determined by a statutory regulation, the so-called Pension Value Ordinance. This, in turn, is based on the data relevant for the calculation, such as the development of gross wages and salaries.
Function and significance of the current pension value
Basis of pension calculation
The current pension value is the central calculation value for determining the pension amount in the statutory pension insurance. The monthly pension results from multiplying the total number of individually acquired earnings points by the current pension value in force. The formula is as follows:Monthly Pension = Earnings Points × Current Pension Value
Impact on various types of pension
The current pension value is relevant not only for the old-age pension. It also forms the basis for calculating the reduced earning capacity pension, survivors’ pension, parental pension, as well as other pensions under the statutory pension insurance.
Calculation and adjustment of the current pension value
Pension adjustment formula
The calculation of the current pension value is carried out using the so-called pension adjustment formula, which is set out in the SGB VI. In particular, the following are taken into account:
- Development of gross wages and salaries
- Sustainability factor (ratio of contributors to pensioners)
- Contribution rate to pension insurance
- so-called Riester factor (includes private provision)
The adjustment takes place annually on July 1. The basis is the gross wage development of the calendar year before last.
Difference between West Germany and East Germany
Historically, since German reunification, there have been different current pension values for the old and new federal states. The aim was to gradually harmonize adjustment with the different wage levels in both parts of the country. Until July 2024, different pension values applied; with full alignment, from July 2024 the same current pension value applies throughout Germany.
Legal significance and practical consequences
Binding effect and protection of legitimate expectations
Adjustments of the current pension value have an effect on all current and future pension payments. They are subject to so-called protection of legitimate expectations: pensions already granted may only be adjusted with effect for the future and not retroactively.
Publication and announcement
The Federal Government announces the current pension value annually by ordinance. The Bundestag is informed in advance of the new amount. Publication and entry into force take place in good time before the adjustment date.
Tax aspects
The current pension value affects the amount of the pension and thus also the tax situation of the pensioners. Since the taxation of pensions under the Retirement Income Act (AltEinkG), the taxable portion of the pension depends on the individual pension commencement. Changes in the current pension value may lead to adjustments in the tax burden.
Socio-political significance
Protection of purchasing power
The adjustment of the current pension value ensures that pensions are at least partly adjusted to economic development (especially wage development). This serves to protect the purchasing power of pensions and contributes to the social security of older generations.
Sustainability factor and intergenerational equity
The sustainability factor takes demographic developments into account. This ensures that pensions are adjusted to the burdens and changes in the numbers of contributors and pensioners. The aim is to maintain intergenerational equity in the pay-as-you-go pension system.
Summary
The current pension value is a legally defined, annually adjusted cash amount. It forms the central basis for calculating pension benefits from the statutory pension insurance in Germany. Determination and adjustment take place according to the statutory pension adjustment formula, taking into account wage development, the ratio of contributors to pensioners, and additional factors. From July 2024, a uniform pension value applies throughout eastern and western Germany. The current pension value is a crucial element for ensuring the performance and fairness of the German pension system.
Frequently Asked Questions
How is the current pension value determined legally and how often is it adjusted?
The current pension value is determined in accordance with § 68 of the Sixth Book of the Social Code (SGB VI) by regulation of the Federal Government with the consent of the Bundesrat. The adjustment takes place once a year as of July 1st. The basis for determination is wage development in Germany, the sustainability factor, as well as pension adjustment formulas regulated in SGB VI. In addition, price developments and the so-called contribution rate factor are taken into account. The Federal Government publishes an announcement on the pension adjustment in which the new pension value is documented. The adjustment decision is subject to statutory requirements and is also subject to legal review by the social courts in case of disputes.
What legal effects does a change in the current pension value have on ongoing pension payments?
A change in the current pension value has a direct effect on all current pension entitlements calculated according to SGB VI. With the annual adjustment, pensions are automatically updated without the need for a separate application. The Federal Ministry of Labour and Social Affairs and the German Pension Insurance are required to pay out the new pension amounts as of July 1. Pension statements are updated accordingly. If adjustments are made incorrectly, there is the right to appeal and to take legal action before the social courts.
Is the current pension value subject to legal restrictions regarding the amount of the adjustment?
Yes, statutory safeguard clauses in SGB VI limit downward adjustments: there is a so-called “pension value guarantee” which generally prevents pension reductions (§ 254c SGB VI). Deviations, especially zero rounds, are possible, but reducing the current pension value is generally excluded—except in exceptional cases, if explicitly provided for by law. Furthermore, the adjustment is subject to fiscal and contribution-related framework conditions, especially wage development and the sustainability of the pension insurance.
What are the legal information obligations regarding changes to the current pension value?
According to SGB VI, the legislator and subordinate authorities have an explicit duty to inform. After each adjustment, insured persons must be informed in writing about the new pension values and their effects on their individual claims (e.g., by notifications from the German Pension Insurance). Publication in the Federal Law Gazette ensures public transparency. In the case of incorrect or omitted notifications, there may be a social law claim for correction and, if necessary, back payment.
What legal options do insured persons have if they consider a pension adjustment based on the current pension value to be incorrect?
If an insured person believes that their pension has not been correctly calculated following adjustment to the current pension value, they can file an objection according to the provisions of the Social Code (especially SGB X and SGB VI). This must be done within one month after receipt of the pension notice. If the objection is rejected, legal action can be brought before the social court. The courts will then review whether the requirements for adjustment and calculation have been properly implemented. If there are justified complaints, a recalculation and, if necessary, a back payment of the pension will be made.
What are the legal consequences of incorrect determinations of the current pension value by the Federal Government?
If the Federal Government violates the relevant law (in particular the implementing regulations in SGB VI) when determining the current pension value, this can have significant legal consequences: the incorrect pension value regulation can be reviewed by the social courts in administrative proceedings. If illegality is established, a legally correct adjustment and, if necessary, retroactive payment must be made. Furthermore, pensioners affected by the error can assert compensation and back payment claims.
To what extent is the determination of the current pension value subject to judicial review?
The determination of the current pension value by statutory ordinance is subject to review by the Federal Constitutional Court and administrative courts. Violations of the legally prescribed procedure or constitutional requirements, especially the principle of equal treatment according to Art. 3 of the Basic Law, can be reviewed by the courts. Social and administrative courts are authorized to set aside individual decisions based on an unlawful determination. At the same time, the entire underlying ordinance can also be declared unlawful in the event of serious procedural errors.
