How is the German state pension calculated?

The pension formula is: sum of pension points × access factor × pension type factor × current pension value. The points reflect your income relative to the average wage of all insured people, the access factor accounts for an earlier or later start, the pension type factor is 1.0 for an old-age pension, and the current pension value has been €42.52 per point since 1 July 2026. Someone with 40 pension points retiring at the standard age therefore receives roughly €1,700 gross per month.

What is a pension point and what is it worth?

One pension point corresponds to a calendar year in which you earned exactly the average wage of all insured people — provisionally €51,944 in 2026. Earn half of that and you get 0.5 points; earn double and you get 2.0 points. At the top the contribution ceiling of €101,400 caps the annual gain at 1.9521 points. Each point currently raises the monthly gross pension by €42.52.

How large is the deduction if I retire early?

For every month you draw your pension before your standard retirement age, the access factor falls by 0.003 — a deduction of 0.3 percent per month or 3.6 percent per year. Starting at 63 with a standard age of 67 means 48 months × 0.3 percent = 14.4 percent. On a gross pension of €1,600 that is around €230 less per month. The deduction is permanent and later also reduces any survivor's pension.

When can I retire at 63 or 65 without deductions?

Two qualifying periods matter. With 35 qualifying years you can draw the pension for long-term insured from 63 — but with the full deduction up to the standard retirement age. With 45 qualifying years the pension for especially long-term insured applies: for everyone born in 1964 or later it is deduction-free at 65, two years before the standard age of 67. Qualifying periods include not only employment but also child-raising and care periods.

Is it worth working longer and deferring the pension?

If you draw your pension after the standard retirement age you receive a bonus of 0.5 percent for each month of deferral, i.e. 6 percent per year. If you also keep working you accumulate additional pension points at the same time — the two effects add up. Working one year longer can therefore raise the pension by 8 to 9 percent. Purely arithmetically it takes around 15 to 17 years for the bonus to offset the pension payments forgone; for people in good health who enjoy their work it pays off over the long run.

How much tax will I pay on my pension?

Only the taxable share is subject to tax, and that share depends on the year your pension starts. For a start in 2026 it is 84 percent, rising by 0.5 percentage points per cohort — 86 percent in 2030, 91 percent in 2040, with full taxation only from 2058. The tax-free remainder is fixed in euros as your pension allowance and does not change later. From the taxable pension you also deduct your health and care insurance contributions as special expenses; only what is left meets the income tax tariff with its basic allowance of €12,348.

Which contributions are deducted from the pension?

Compulsorily insured pensioners pay half the general health insurance rate of 7.3 percent plus half the supplementary rate; with an average supplementary rate of 2.9 percent in 2026 that comes to 8.75 percent. The pension insurance fund pays the other half. The care insurance contribution of 3.6 percent, however, is borne by pensioners alone; childless pensioners pay 4.2 percent, those with several children under 25 correspondingly less. On a gross pension of €1,600 that means about €198 for health and care insurance before any tax is due.

How accurate is this pension calculator?

The calculator implements the pension formula, the access factor under § 77 SGB VI, the age limits under §§ 235 and 236b SGB VI and the taxation rules of § 22 EStG correctly, using the verified 2026 figures. The uncertainty lies not in the formula but in the assumptions: your current salary is projected forward in a straight line, and future pension increases and gaps in your insurance record are left out. The closer your retirement date and the more precisely you enter your pension points from the official statement, the more reliable the result. Only the information issued by the German pension insurance is binding.

Pension Points Simply Explained | Pension Calculator

Pension Points Simply Explained

Pension points are the currency of the German state pension system. They almost single-handedly determine how large your later pension will be — and yet very few people could say how many points they hold or what a single point is worth. The principle fits into one sentence: one pension point is one year of work at the average wage.

One year, one average wage, one point

The pension insurance compares your contributory annual gross income with the average wage of all insured people. For 2026 that average wage is provisionally set at €51,944 under Annex 1 of the Social Code Book VI. Earn exactly that amount and you receive precisely 1.0 pension points for the year. Earn €25,972, half as much, and you receive 0.5 points; at €77,916 it is 1.5 points.

The formula is simply this: pension points per year equals your annual gross earnings divided by that year's average wage. Someone earning €45,000 accumulates 45,000 ÷ 51,944 = 0.866 points. At the end of a working life all the annual figures are added up — and it is that sum which enters the pension formula and appears on your official pension statement.

The cap: the contribution ceiling

There is a ceiling on point collection. Contributions are only levied up to the contribution assessment limit, which in 2026 exceeds €100,000 for the first time: €101,400 per year, or €8,450 per month. That yields the maximum possible value of 101,400 ÷ 51,944 = 1.9521 pension points per calendar year.

Someone earning €160,000 therefore receives exactly the same number of points as someone on €101,400. For high earners this means the state pension covers an ever smaller share of their accustomed standard of living the further their income sits above the ceiling. The pension calculator flags this cap as soon as the salary you enter exceeds it.

What a point is worth today

The current pension value fixes how many euros of monthly pension a single point delivers. Since 1 July 2026 that is €42.52 nationwide — previously it was €40.79, an increase of 4.24 per cent. One extra point on your pension account therefore means €42.52 more gross pension every month, or €510.24 a year.

Read the other way round: 30 points produce €1,275.60 gross; 45 points produce €1,913.40. The often-quoted standard pension — 45 years of work at the average wage — is exactly this figure. It is a statistical benchmark, not a realistic norm: the actual average pension is considerably lower, because hardly anyone earns precisely the average for 45 uninterrupted years.

Points that do not come from work

Not every pension point comes from a salary. Child-raising periods are credited for up to three years per child and valued roughly as average earnings — about 3.0 points, or a good €127 of monthly pension per child. Periods of caring for a relative, periods of receiving wage replacement benefits and, under certain conditions, periods of schooling also affect the pension account.

That is precisely why a record clarification pays off. Many insurance records have gaps because training, child-raising or care periods were never reported. Every period added afterwards raises the number of points permanently — and with it every single pension payment for the rest of your life.

Buying points — and what to remember

In certain cases points can genuinely be acquired: anyone who has turned 50 and is aiming for an early old-age pension can make compensating payments, which are converted directly into additional pension points. Voluntary contributions are also possible, for instance to complete the qualifying period of 35 years. Before considering that, find out where you stand: enter your point total into the pension calculator and it will project it forward at your current salary. And remember one thing — think in points, not in euros. The points are your balance; the pension value is merely the exchange rate at which it is paid out in retirement.

Pension Points Simply Explained

Pension Points Simply Explained

One year, one average wage, one point

The cap: the contribution ceiling

What a point is worth today

Points that do not come from work

Buying points — and what to remember

You might also find useful

Active Pension Calculator

Early-Start Pension Calculator

ETF Savings Plan Calculator