Securing a State Pension as a Self-Employed Parent: A Guide
- Author: Matthias Urbach
- Reading Time: Approx. 3 minutes
Strategies for self-employed parents with children to guarantee a government pension - Independent parents with offspring can acquire a government retirement benefit
In the realm of retirement planning, self-employed individuals often take matters into their own hands, utilizing life insurance policies, professional pension schemes, or a combination of both. However, few are privy to the fact that they can also receive a state pension akin to their employed counterparts.
Indeed, self-employed individuals in Germany can earn pension claims through raising children under the German Pension Insurance (DRV). These periods are referred to as child-rearing periods. Many self-employed individuals already possess pension entitlements, they merely need to claim their pension.
A Secure Pension with Two or More Children
Five years of pension insurance are required to receive a pension. The German Pension Insurance refers to this as five years of "waiting time". For each child, one of the parents can have three years of pension credited. Typically, these child-rearing periods are attributed to the mother. For children born before 1992, it's two and a half years. With two children, one parent already has at least five years of pension, entitling them to a pension.
Around 120 Euro Monthly Pension per Child
Child-rearing periods are assessed as if the average wage of pension-insured individuals was earned. This amounts to a monthly pension of 118 Euro, or 122 Euro after the pension increase on July 1, 2025.
Parents can also divide the child-rearing periods between themselves. The key factor is the primary caregiver. This can be established through parental leave or employment contracts. In principle, parents can freely divide the pension years for the child, but this must be done in the first years of the child's life.
One Child? Simply Make Voluntary Payments!
If self-employed individuals have only one child or two children and divide the child-rearing periods, they will only have three years of pension. However, the two missing years for payment can be supplemented through voluntary payments.
Self-employed individuals can make voluntary contributions to the German Pension Insurance at any time. The amount is freely chosen within certain limits and can be claimed as "special expenses" for tax purposes. As of current, up to around 29,000 Euro can be claimed for old-age provision in the income tax return.
In principle, anyone living in Germany and not compulsorily insured can make voluntary contributions. The current minimum contribution (2025) is 103.42 Euro per month, and the maximum is 1,404.30 Euro per month.
Pay Once, Receive Pension Forever
Contributions can be made monthly or in a single payment. It's worth noting: The contribution for 2024 can still be paid until March 31. Therefore, paying 1,241.40 Euro for 2024 and the same amount for 2025 secures two pension years. Together with three child-rearing years, this would already qualify for a pension claim.
And it's worth it: Although a one-time payment of around 2,880 Euro only entitles a pension of 11 Euro per month, the three additional child-rearing years result in a state pension of 129 Euro per month.
This amount increases year by year with wages - at least under the current legal framework. By the next pension increase on July 1, 2025, the 129 euros will have risen to nearly 134.
Check beforehand if parenting time is recognized
Important to note: The pension office only recognizes parenting time as long as the parents do not acquire child pension claims elsewhere. This is the case for civil servants, for example. However, this does not usually apply to professional pension institutions. Therefore, freelancers practically always have this claim. But they need to assert it.
For this, it is recommended to initiate a review of the account. Or to arrange a consultation first. It is possible that waiting periods have also arisen through mini-jobs or other special reasons. And it may not even be necessary to pay in voluntarily.
- Germany's State Pension
- Self-Employment
- German Pension Insurance
- Child-Rearing Periods
- Voluntary Contributions
Insights:
- In Germany, periods spent raising children can be credited towards the state pension. This is part of the statutory pension insurance (Gesetzliche Rentenversicherung) and helps increase the pension amount.
- While receiving parental allowance (Elterngeld), parents do not automatically receive pension credits. However, they can voluntarily contribute to the pension system during this period to maintain or increase their pension entitlement.
- Self-employed individuals can make voluntary contributions to the statutory pension insurance. These contributions are tax-deductible and help build up pension entitlement. By making these contributions during periods of reduced income, such as during child-rearing, self-employed parents can ensure they maintain or increase their future pension.
- In addition to statutory pension contributions, self-employed individuals can also invest in private pension schemes like the Rürup-Rente or Riester-Rente. These schemes offer tax benefits and can provide additional retirement income. The Rürup-Rente is particularly beneficial for self-employed individuals as it offers a lifetime monthly pension starting at age 62[4].
- It's advisable to consult a financial advisor to optimize pension planning based on individual circumstances.
- Single self-employed parents can increase their state pension by claiming the pension entitlements earned during child-rearing periods.
- If a self-employed individual has only one child, they can supplement the missing years for pension through voluntary contributions to the German Pension Insurance.
- For parents to divide the child-rearing periods between themselves, they must establish the primary caregiver through parental leave or employment contracts in the first years of the child's life.
