The pension equalization is intended to compensate for large differences in pension entitlements. Cunaplus_M.Faba/Getty Images
The equalization of pensions in the event of a divorce to compensate for large differences between the pension entitlements of married couples.
Differences arise, for example, if one partner does not work for a while due to raising children and thus pays less money into the pension fund.
In the case of pension equalization, both spouses each transfer half of their accumulated pension entitlements to their partner – we will explain what that means.
When two people love each other, they can overcome all obstacles together – at least that’s what our inner romantic believes. But sometimes love alone isn’t enough to stay happily ever after – and then divorce is imminent.
The divorce process is not only emotional, it is often about money. In addition to legal and court costs, the main question is how to make ends meet on your own in the future. This is particularly important when it comes to retirement.
We explain to you what pension entitlements you have after a divorce and how the pension equalization works.
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What is the pension equalization?
As a working person, you collect so-called pension entitlements during your marriage. The pension entitlement quantifies the amount that can be expected as a monthly old-age pension when you reach retirement age. It results from the earnings points that are credited to your pension account through contribution payments to the pension fund.
But if you are unemployed for a while or can only work part-time because you are raising children, you usually pay less into the pension fund than your spouse over this period. This results in different pension entitlements within the marriage.
The German pension insurance considers the pension entitlements that have arisen during a marriage as “communal lifetime achievement“. In the event of a divorce, large differences in the accumulated entitlements should therefore be compensated for by the pension equalization. The legal basis for this is the Pension Equalization Act (Insurance CompensationG).
How does the pension equalization work?
The principle behind the pension equalization is simple. In principle, every pension entitlement that arose during the marriage is halved and then both partners are credited with 50 percent.
To put it simply: Partner A gives half of his pension entitlements to Partner B and vice versa. This applies to both statutory and private pension insurance as well as company pension schemes, civil servant pensions, Riester and Rürup pensions and supplementary pensions.
The statutory pension insurance specifies the entitlements in the form of pension points, which are also called payment points. In this case, half of the points earned during the marriage are given to the partner in the event of a divorce. The value of these points adjusts the German pension insurance regularly to the economic situation; it is currently 37.60 euros. In the following example, for the sake of simplicity, we calculate with euro amounts and not with points.
Here is a simplified example:
Let’s assume that at the time of the marriage, Phillip was entitled to a statutory pension of 100 euros a month. In the course of the marriage, his entitlement increased and at the time of the divorce was 700 euros. He also took out an additional pension during the marriage, which now stands at 80 euros. In total, Phillip has entitlements during the marriage of 680 Euro collected.
At the time of the wedding, his ex-wife Beate was entitled to a monthly civil service pension of 150 euros. In the case of divorce, her claim amounts to 950 euros. She has not taken out any additional care. Overall, Beate has entitlements during the marriage in the amount of 800 collected euros.
The pension equalization now provides that Phillip gets half of Beate’s entitlements and vice versa. That means: Phillip gets 400 euros from Beate’s civil service pension. Beate, in turn, gets 340 euros from Phillip’s statutory pension and supplementary pension. This results in a pension entitlement for both of them 740 Euro.
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What types of division are there in pension equalization?
When it comes to pension equalization, a distinction is made between internal division and external division, with external division only taking place in exceptional cases.
In the case of internal division, the spouses do not have to pay each other the amounts that they “owe” to each other. You simply transfer the pension entitlements to the relevant pension provider. For example, entitlements to statutory pension insurance are only credited to statutory pension insurance. This also applies if the partner with compensation claims does not have their own account with this insurance carrier. If necessary, a new account will be set up for that person. However, if he also has an account with the insurance company, the compensation claims can be offset against each other individually.
In the case of external splitting, the pension entitlements in the pension equalization are not equalized with the same insurance provider. Partner A’s entitlements with pension provider Y then go to partner B’s account with pension provider Z. However, this only happens in rare cases – for example, if there is a special agreement.
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How does the pension equalization affect your pension?
Pension equalization can reduce the pension for one of the two partners and increase it for the other. It is also important whether or not you are already retired at the time of the divorce.
If you are not yet retired, the following applies:
Your changed pension entitlements will be determined at the time of the court order, but will not be implemented until you actually retire. If the pension equalization provides for a reduction in your pension, you can also compensate for the minus through voluntary contribution payments. But this is only possible as long as you Line alters boundary have not yet reached.
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If you are already retired,:
Your pension increases or decreases from the month when the court order takes effect. If you are already receiving a pension when you divorce, the German pension insurance will receive a corresponding notification from the family court. The amount of your pension will then only be adjusted at the end of the following month.
When does the right to a pension equalization cease to apply?
The pension equalization applies not only to marriages, but also to registered civil partnerships that have been established since January 1, 2005. However, the family court decides whether you are entitled to it or not. To do this, it requests information about your entitlements from your pension providers. After examining the rights, the family court announces its decision as part of the divorce decree. This decision is binding after the appeal period has expired.
The following reasons are considered to be an exclusion for the pension equalization:
In the case of couples who have only been married for three years or less, the pension equalization is only carried out upon application.
If the differences in pension entitlements are only minor, the family court usually does not compensate.
Spousal or civil partner agreements
As a married couple, you can also make your own agreement on the equalization of pensions. In the context of a marriage contract, for example, it is possible to exclude him completely. You can also agree on a compensation amount or other consideration.