Entgeltpunkte

Entgeltpunkte are the units used in the German statutory pension insurance to quantify an individual’s earnings-related entitlement. They accumulate over working years and represent the amount of pension rights a person earns from their income subject to social security contributions.

How they are earned: In each year, the gross income that is subject to pension insurance is compared to the average income of all insured employees in that year. The ratio determines the number of Entgeltpunkte earned for that year. If the income equals the average, you receive 1 Entgeltpunkt; if it is half, you receive 0.5, and so on. The calculation is capped by the Beitragsbemessungsgrenze, so earnings above this cap do not increase the points for that year.

Accumulation and use: Points accrue year by year and are stored by the pension provider as a measure of the lifetime earnings-conscious entitlement. They are not a cash balance but the basis for future pension payments.

Calculation of the pension: The total Entgeltpunkte are multiplied by the current value of one Entgeltpunkt (aktueller Rentenwert) and by the pension type factor. The standard old-age pension uses a full factor (often referred to as Rentenartfaktor 1.0). The result is the monthly pension amount, subject to adjustments over time and other regulatory rules.

Purpose and relevance: Entgeltpunkte provide a simple, comparable metric to translate earnings history into a pension entitlement. They reflect changes in wage levels through the annual average and are the central variable in the German state pension formula.

Additional notes: The system links lifetime earnings to retirement benefits and is complemented by years of contributions, retirement age rules, and periodic reforms that can affect the value per point and the factors used in calculation.