Pension for Reduced Earning Capacity

Definition, Explanation

If you are no longer or only in a limited manner able to work due to sickness or disability, this will called a reduction in earning capacity. Typical diseases are depressions, herniated disc, cardiovascular diseases or cancer. In such cases the living will be paid by the pension for reduced earning capacity. This is defined by the "Gesetz zur Reform der Renten wegen verminderter Erwerbsfähigkeit, § 435 SGB III". This pension replaces former forms of pension such as disability pension and invalidity allowance. If there have been claims before Jan 1st, 2001, the old regulations remain valid.

Preconditions

You have not reached regular retirement age
A full recovery of earning capacity by measures of rehabilitation is not possible
Generally, you are only able to work for 6 hours a day
You have been covered in the statutory pension scheme for at least 5 years (the so-called waiting period). This includes:
- Contribution periods even if you have received sickness benefits, unemployment benefit I or ALG II, if you have dedicated yourself to child education or home care, of if you have paid voluntary contributions
- Substitute qualifying periods, e.g. political persecution in the former GDR
- Pension rights adjustment on divorce
- Loadings on so-called 400-Euro-Jobs
- Pension splitting
In the last 5 years of your membership you have paid obligatory contributions for at least 3 years.
The waiting period can be less than 5 years, if
- The reduction in earning capacity has been caused by an accident at work or an industrial disease and you are liable to insurance deductions at this very moment or you have paid contributions for at least 12 months within the last 2 years
- The reduction in earning capacity commences within 6 years after your apprenticeship and you have paid contributions for at least 12 months within the last 2 years

The process of acceptance of reduced earning capacity

Application
Verification of the reduced earning capacity on the basis of medical estimates
Report about the payment of pension for reduced earning capacity

Benefit: full pension for reduced earning capacity

You will not be able to work more than 3 hours a day for an indefinite period of time
You can not find a job on the regular job market (Sheltered workshops and such alike excluded.)

Benefit: 50 % pension at partially reduced earning capacity

If you are able to work between 3 and 6 hours a day, you fulfil the preconditions for a partial reduction in earning capacity. You may then claim half of the pension for reduced earning capacity
The partial pension for reduced earning capacity will then guarantee your living in combination with a part-time job. If you can not find a part-time job and you will become unemployed, the full pension for reduced earning capacity, the so-called Arbeitsmarktrente, can be given to you
Insurants that were born before Jan 2nd , 1961 may already claim pensions for reduced earning capacity if they are incapable of working, that is they can no longer work in their original profession and do not find another adequate job. However, insurants that were born after Jan 1st, 1961 are obliged to take a job which is below their qualifications before they may claim pensions for reduced earning capacity

Payment regulations

The full or partial pension for reduced earning capacity will be given to you 6 months after your membership started at the earliest. Before that, you will receive continued remuneration for 6 weeks. Afterwards you will receive sickness benefits
The amount of payments depends on your present income, the number of years of coverage and the question if you are living in the old or newly-formed German states. Insofar, the calculation has to be done individually. On average, the full pension for reduced earning capacity amounts to 30-40 percent of the current gross income. With partial pension for reduced earning capacity, it is 50 percent of this amount
Full pensions for reduced earning capacity can only be received if you are over 63 years of age. If you are younger, 0.3 percent (and 10.8 % maximum) will be subtracted for each month of earlier reception
The payment is defined as temporary annuity. That means it is limited to 3 years. Further payments are possible through new applications. Enduring pension payments can be allowed if an improvement of the reduced earning capacity is unlikely to happen
After your 65th birthday your pension for reduced earning capacity will be automatically transformed into a regular old-age pension
Payments from accident insurances will reduce the pension for reduced earning capacity
Payment is only possible until the regular retirement age has been reached
While receiving pension for reduced earning capacity, you are liable to insurance deductions within the unemployment insurance

Taxation:

Generally, pensions are regarded as income and are therefore subject to taxation. However, no taxes will have to be paid normally due to tax exemptions and special expenses.

Additional income:

Pension for reduced earning capacity can be reduced or even cancelled, if
- you receive salary from a secondary job
- receive income by freelancing
- you receive social benefits such as unemployment compensation
- you receive payments from the statutory pension scheme
- you receive interim pension payments
- you may claim continued remuneration
An income of more than 400 Euros per month additionally to full pensions for reduced earning capacity leads to a reduction of your payments for reduced earning capacity. This will be done by so-called ¾, ½ or ¼-payments. You may earn additional money if this amount remains below EUR 400. You are allowed to earn EUR 800 per month for the period of 2 months without your pensions being affected. With partial pensions for reduced earning capacity, the limits for additional earnings are EUR 857,33 (Western Germany) and EUR 753,55 (Eastern Germany)
If you did not have a job or if you only had a mini-job and therefore have only received low earnings, an individual limit for additional earnings will be calculated. You are allowed to overshoot this limit for 2 months per calendar year, reaching the double earnings maximum
The following payments will not be regarded as additional earnings
- Payments for nursery
- Earnings that have been generated by working in sheltered workshops or such alike

Application forms

Tips, Checklist

Make sure to include meaningful medical estimates by medical specialists, your health insurance agency or the Federal Labour Agency as well as your case history in your application. This will raise your chances of acceptance
If your application has been rejected, you should enter an objection. If possible, go to court
Ask your lawyer for support and file legal action if you think the reductions of your pension for reduced earning capacity are unjust
If you are over 60 years of age, you should consider if it might be sensible for you to claim old-age pensions with reductions of 10.8 percent maximum instead of claiming pension for reduced earning capacity
If your application on further payments of temporary annuity has been rejected, you should claim Arbeitslosengeld I
Inform yourself about conditions and limits of additional earnings at you pension scheme before taking on a job or freelancing

Last update: 06/22/2010

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