2005 Reform

Changes to the Pension Provision of the Young

Factors affecting the earnings-related provision of the young include a change in the lower age-limit for insurance coverage and insurance accrual for periods of study.

Earnings-related pension accrues for all work done between the ages of 18 and 68. Previously, the lower age limit was 23 years.The obligation to take out an earnings-related insurance has thus also risen to 18 years. Employers do not have to insure employees who are younger than that. Previously, pension insurance had to be taken out for all aged 14 and above.

Earnings-related pension accrues also for periods of study. Pension provision for periods of study is a benefit that was introduced in connection with the 2005 pension reform. Pension accrues for three to five years, depending on the level of the degree. The earnings that the benefit is based on is a computational monthly wage of EUR 694.83 (in 2013).The benefit is financed by the State. The prerequisite for receiving this benefit is that the studies have led to a degree.

A lump-sum increment is added to the pension of a person who has begun drawing a disability pension when under the age of 50. The increment is added once the person has drawn the pension for five years. The higher the increment the younger the person was when retiring on a disability pension. The increment improves the pension level of the young which is often very modest due to small earnings. There was no equivalent increment prior to the 2005 pension reform.

The accrual percentage increases pronouncedly with age. Work done after the age of 63 compensates considerably for any disruptions in the early stages of the career and thus raises the low pension rate. However, low earnings at the initial stages of the working career affect the pension calculated on the basis of the earnings throughout the entire working career.