Calculating Your German State Pension: What You Will Really Receive
Most people know their future pension only as a number on a letter that lands in the letterbox once a year. What sits behind that number, and why considerably less arrives in the bank account, often remains unclear. Yet the German pension formula is remarkably transparent — it consists of four factors, two of which you can influence yourself. This guide walks you through the complete calculation, from pension points to tax; you can enter your own figures alongside in the pension calculator.
The pension formula in four factors
The monthly gross pension is: sum of pension points × access factor × pension type factor × current pension value. The pension type factor is always 1.0 for an old-age pension and therefore drops out of the arithmetic. The current pension value has been set nationwide at €42.52 per pension point since 1 July 2026 — it last rose by 4.24 per cent. That leaves two quantities that genuinely matter: your pension points and your access factor.
A worked example makes this tangible. Someone who has accumulated 40 pension points over their working life and retires at the standard age receives 40 × 1.0 × 1.0 × €42.52 = €1,700.80 gross per month. That figure is the starting point for everything that follows — noticeably less remains net.
Pension points: the heart of the calculation
One pension point corresponds to a calendar year in which you earned exactly as much as the average of all statutorily insured people. For 2026 that average wage is provisionally set at €51,944 gross per year under Annex 1 of the Social Code Book VI. Earn €51,944 and precisely 1.0 points are credited; at €40,000 it is 0.77 points, at €80,000 it is 1.54 points. At the top the collection is capped: above the contribution ceiling of €101,400 no further contributions are levied, so a maximum of 1.9521 points per year is possible — which is why the state pension covers the smallest share of the accustomed standard of living at very high incomes.
The access factor: retiring earlier or later
The access factor is exactly 1.0 if you retire at your standard retirement age, which is 67 for everyone born in 1964 or later. Start earlier and the factor falls by 0.003 per month — a deduction of 0.3 per cent per month or 3.6 per cent per year. Start later and it rises by 0.005 per month, a bonus of 0.5 per cent per month. The factor works multiplicatively on the entire pension.
Applied to our example: starting at 63 instead of 67 triggers the maximum deduction of 14.4 per cent, and the gross pension falls from €1,700.80 to €1,455.88 — a loss of €244.92 every month, permanently. Someone who instead works until 68 receives a 6 per cent bonus and therefore €1,802.85. The span between the two extremes is almost €350 a month, without a single pension point having changed.
From gross to net: health and care insurance
As a compulsorily insured pensioner you pay half the general health insurance rate of 7.3 per cent plus half the supplementary rate. With an average supplementary rate of 2.9 per cent in 2026 that produces 8.75 per cent, withheld directly from the pension, while the pension insurance fund covers the other half. The 3.6 per cent contribution to social care insurance, by contrast, is borne by pensioners alone, and childless people pay 4.2 per cent.
On a gross pension of €1,700.80 that means €148.82 for health insurance and €61.23 for care insurance — €210.05 together, a good 12 per cent, before tax has even entered the picture. Anyone without children pays a further €10 a month on top. These deductions are the reason the gross figure on the official pension statement is routinely read too optimistically.
Tax: only the taxable share counts
Pensions are not taxed in full. What matters is the taxable share, determined by the year your pension starts. Since the Growth Opportunities Act it rises by only 0.5 percentage points per cohort: for a pension starting in 2026, 84 per cent is taxable; in 2030 it is 86 per cent; in 2040 it is 91 per cent — full taxation applies only from the 2058 cohort. The tax-free remainder is fixed in euros as your pension allowance and stays unchanged thereafter.
From the taxable portion you subtract the flat allowance for income-related expenses of €102 as well as your health and care insurance contributions in full as special expenses. Only what remains meets the income tax tariff of § 32a of the Income Tax Act, with a basic allowance of €12,348 in 2026. In our example roughly €14,500 of taxable income remains, attracting about €350 of income tax per year — around €29 a month. In total, €1,700.80 gross becomes roughly €1,460 net, a deduction rate of about 14 per cent.
The limits of the calculation — and the next step
Every pension projection is an extrapolation, not a promise. The calculator assumes your current salary stays constant until retirement and that there are no gaps in your insurance record; pay rises, part-time phases, parental leave or unemployment change the result considerably. Other retirement income, such as an occupational pension, will also raise the tax rate on the whole sum later. The most reliable basis is your annual pension statement: enter the pension points shown there into the pension calculator and only the remaining years have to be projected. Then set the result against your current net income — the difference is your pension gap, and the ETF savings plan calculator shows what monthly rate would close it.