There is no maximum amount for pensions accruing beginning in 2005 but there is one for pensions accrued up until the end of 2004.
The maximum amount is only applied to municipal and other public sector pensions and only affects pensions accrued until the end of 2004. If you have retired or will retire in 2005 or later and you have only accrued pension from private sector employment, there is no maximum amount.
When calculating local government pensions all statutory pensions accrued up to 31 December 2004 are added together and they have a maximum limit which depends on a person’s birth date:
- First the number of days from the person’s 23rd birthday until the end of 2004 is calculated and then how many per cent this is of the figure 14,400.
- The maximum amount is attained by calculating the same percentage of the number 60.
- For example, a person born on 1 January 1950 and has turned 23 on 1 January 1973, from which date it is 11,520 days until the end of 2004. 11,520 is 80% of 14,400. The maximum amount is attained by calculating 80% of 60, which is 48%. So, 48% is the maximum amount for basic pensions accrued before 31 December 2004.
If you work in a municipal job until your retirement age, a supplementary pension accrued before 1995, which can be at most 6%, is applied to your pension, in addition to the maximum amount. If your retirement age is less than 63, the maximum amount will be raised.
Example
- A person born on 1 January 1946 reaches his or her retirement age in 2010. Before 2005, the person has worked for state and private sector employers in addition to the municipality. The maximum amount of these pensions is 54% (without the supplementary pension which is at most 5%).
- The pension accrual consists of 600 euro of local government pension, 200 euro of state pension and 100 euro of private sector pension, i.e. altogether 900 euro. If the largest pensionable salary is, for example, 1,500 euro, 54% of it is 810 euro. The accrued pensions equal 90 euro over the maximum amount so the amount exceeding the maximum amount (90 euro) is deducted from the local government and state pensions. The amount of pension accrued up to 31 December 2004 is 810 euro/month (+ supplementary pension 75 euro).
- There is no maximum amount for pension accruing starting from 1 January 2005. If your annual earnings in future years are e.g. 18,000 euro/year, pension will accrue at a rate of 2.0% annually until you turn 63, i.e. altogether 8% = 120 euro/month from 2005 to 2009. From when you turn 63 until you retire, pension accrues at 4.5% per year. E.g. if your retirement age were 64 you would accrue 67.50 euro/month (if your annual earnings are the above-mentioned 18,000 euro). The final pension accrued up until the end of 2004 would be 885 euro and 187.50 euro accrued after 2005, so altogether 1,072.50 euro/month. This equals 71.5% of the monthly income when, according to the old rules, the pension accrual could at most have been 65%.
