Pension splitting when raising children: an overview

Raising children is a challenge for many families. It requires time, energy and resources. One of the areas that is often neglected is financial security. If parents interrupt their careers to care for their children, this may reduce their retirement benefits. This is where pension splitting comes into play – a scheme that allows couples to share their pension entitlements, offsetting any financial disadvantages they may face.
What is pension splitting?
Pension splitting is a scheme in Germany that allows couples raising children to split their pension entitlements. Under this scheme, one spouse transfers some or all of the pension points they earned during the marriage to the other spouse. This strengthens the pension rights of the parenting spouse, who might receive a lower pension due to parenting time or part-time work.

The basics of pension splitting when raising children

Pension splitting is a proactive measure to support parents who take care of their children’s education. Essentially, pension splitting allows a parent to transfer a portion of their pension entitlement to their partner. This transfer takes the form of pension points and can help increase the pension entitlement of the care partner.

The transfer of pension points takes place automatically as soon as a couple gives birth to a child or adopts a child. This means that the couple, whether married or in a registered partnership, will be eligible for pension splitting as long as at least one parent is actively caring for the child.

It is important to note that during the time a parent transfers pension points to his or her partner, he or she does not forfeit those pension points. Rather, the parent’s pension entitlement is preserved, while the care partner’s pension entitlement is increased.

  • Advantages of pension splitting when raising children:
  • Increasing the pension entitlement of the parent taking care of the children
  • Supporting parents in reconciling family and work life
  • Increase the financial security of families
  • Taking into account the work that parents do in raising their children
Pension splitting when raising children: an overview

How pension splitting helps parents raise children

Pension splitting is a method used in Austria to increase the pension entitlement of parents raising children. It allows parents to split their pension contributions so that each parent earns pension rights, even if one of them is raising children.

This scheme applies to parents who live together and whose joint children are under 10 years old. Parents can decide whether or not to use pension splitting. If they do, the pension contributions of the parent raising the children are divided proportionally between both parents. As a result, the parent providing care receives pension rights that he or she would otherwise have lost.

Pension splitting is a valuable support for parents caring for their children. It allows them to gain financial security in the future and gives them the opportunity to fully focus on taking care of their children without worrying about their retirement benefits.

Pension splitting when raising children: an overview

Overall, pension splitting is an important measure to support the family and to reconcile work and family life. It helps parents to raise children and reduce their financial burdens.

How high the pension entitlement can be due to pension splitting when raising children?

Pension splitting is a procedure in which spouses share the entitlements from the statutory pension insurance scheme. Women who were not employed or only marginally employed during the marriage period due to raising children or caring for dependents can benefit most from this procedure.

Pension splitting allows the pension entitlements of both partners to converge. The partner who earned income during the marriage transfers part of his or her pension entitlement to the other partner.

The amount of the pension entitlement transferred is calculated by a so-called pension splitting factor. This factor depends on the duration of the marriage and the share of child rearing, which is reflected in the pension insurance in the form of child rearing periods.

  • The longer the period of marriage and the higher the share of child-rearing periods, the higher the pension entitlement can be through pension splitting.
  • The maximum possible pension entitlement that can be achieved through pension splitting is 50% of the pension entitlement of the working spouse.
Pension splitting when raising children: an overview

In addition, pension supplements can also be achieved through pension splitting if the relinquishing spouse already has a high pension and the other partner has acquired few pension entitlements to date. In this case, pension splitting increases the pension entitlement of both the giving and the receiving partner.

Pension splitting in the case of child rearing

Pension splitting is a method used to divide the pension entitlements of spouses after separation or divorce. This procedure also applies to child rearing and concerns the time during which one parent has interrupted or reduced his or her job in order to take care of a common child.

In order to apply for pension splitting, a specific form must be filled out. In addition to personal data, the form must also contain information on the upbringing of children. It is important to specify the exact period of time. This is calculated from the year of the child’s birth to the year in which the child reaches the age of eight.

The calculated period of child rearing is then taken into account when calculating the pension entitlement. The pension entitlement of the other spouse is reduced by the part transferred to the other spouse as a result of bringing up children.

Pension splitting for child rearing is a complex procedure that requires a lot of effort. However, it should still be taken out to ensure an adequate distribution of pension rights.

How does pension splitting work when raising children??

Pension splitting is a way for spouses to share their pension entitlements. This can be particularly advantageous in the event of unequal employment during the marriage period. The so-called “classical Pension splitting allows the spouse with the higher pension entitlement to transfer part of their pension entitlement to the other spouse.

In the case of raising children, this can be “extended” Pension splitting takes effect, which has been in force since 2014. This allows spouses to claim up to two years per child as joint child-rearing time and transfer parts of their pension entitlements to the other spouse.

The advantages of pension splitting for child rearing are that child rearing and caring for family members are better recognized in the pension system. However, the disadvantages arise from the fact that pension splitting can sometimes lead to a disadvantage in other social security areas, as the income is reduced by the splitting process.

It is therefore advisable to thoroughly inform yourself about the advantages and disadvantages before using pension splitting and, if necessary, to take advantage of individual advice. An optimal strategy can be found to best secure the pension rights of both spouses.

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