In legal terms, the church pension scheme essentially complies with the State Employees’ Pensions Act.
Accrual of pension up to 31 Dec 2004
Up to 31 Dec 2004, accrual of pension was affected by the employee’s age, duration of the employment and amount of earned income:
- No pension at all accrued before the age of 23.
- The minimum duration of employment was 4 months until 1967 and after that 1 month until 1997.
- There was a minimum monthly limit for earned income until 1997.
The pension accrued up to 31 Dec 2004 will be calculated in compliance with the regulations in force at that time. The accrued basic pension is calculated and adjusted with reference to relation to other pensions accrued by the person in question up to 31 Dec 2004 (so-called pension integration). An integration limit is calculated for each person in compliance with the law. If the total of all the pensions taken into account in the integration exceeds the integration limit, the exceeding sum will be deducted from the public-sector pensions.
The church pension scheme underwent changes that were in the main similar to those in the private-sector pensions reform as of 1 January 2005. The characteristics of the KiEL system, including the personal retirement age, accrual of pension, the selected special occupation-specific retirement age and the protection relating to these, remain in force if the employee continues in his/her occupation up to the personal retirement age.
Accrual of pension since 1 Jan 2005
As of 1 Jan 2005, the duration of employment is no longer significant, but rather pension accrues from all annual earnings earned between the ages of 18 and 68, in accordance with the age-related accrual percentage.
Accrual of pension as a percentage of annual earnings:
- 1.5% between the ages of 18 and 52
- 1.9% between the ages of 53 and 62
- 4.5% between the ages of 63 and 68
For persons born in 1949 or earlier whose employment started before 1 Jan 1993 and continues until retirement age, pension will, however, accrue at a rate of 2.0% of the annual earnings, instead of 1.9%, until the age of 63.
Pension will also accrue from work performed after retirement at a rate of 1.5% of the annual earnings regardless of age. For example, if you already receive a pension and still continue to work for the church, pension will accrue to you at an annual rate of 1.5% instead of at the rates given above.
Pension also granted for unpaid work since 2005
Pension currently also accrues from benefits received during periods during which the person has no earned income. Such benefits entitling to pension include the maternity, paternity and parental allowance, earnings-related unemployment allowance, job alternation leave compensation and sickness allowance. Pension will accrue according to the earnings or confirmed income on which the benefits are based as provided by law.
A parent caring for a child of under 3 years of age will also accrue pension for that period, as well as a student studying for a university, university of applied sciences or vocational degree for the period of study. Pension is accrued for studies for a maximum of 3 to 5 years, depending on the level of the degree. Pensions accrued for child care and studies are calculated on the basis of a fixed theoretical income of 644.57 euro/month at the 2010 level.
Pension accrues for the above benefits at a rate of 1.5% of the annual income. An additional requirement for receiving the pension is that your total earned income has been at least 15,470.09 euro (at the 2010 level) before retirement.
No maximum limit for pension as of 1 Jan 2005
Pensions are calculated from the earned income the employee has received during each year. However, a sum equalling the employee’s pension insurance contribution is deducted from the earned income. Unlike the situation up to 31 Dec 2004, there is no maximum limit on pensions accrued since 1 Jan 2005. The final pension is calculated by combining the integrated pension accrued up to 31 Dec 2004 with the pension accrued since 1 Jan 2005 in its entirety.
When calculating the pension, the earnings for each year are re-valued to the retirement year level using a wage coefficient, in which the weighting of earnings is 80% and that of prices 20%.
Pensions being paid, however, are re-valued annually using the earnings-related pension index, where the weighting of wages and salaries is 20% and that of prices 80%.
Life expectancy coefficient to balance out pension spending
The life expectancy coefficient has been applied to pensions for the first time in 2010, concerning persons born in 1948 and later. The life expectancy coefficient is intended to adjust pensions due to increasing life expectancy. A life expectancy coefficient will be calculated for each age group in the year of their 62nd birthday, basing the calculation on an estimate of their expected remaining life time. The life expectancy coefficient is annually approved by the Ministry of Social Affairs and Health. Pensions will be adjusted using the life expectancy coefficient for the recipient’s year of retirement. If the expected lifetime for the age group is long, the life expectancy coefficient will reduce the amount of pension.
