Inquiring about whether care allowance is considered as retirement income? - Inquiry about whether childcare benefits are considered as income for pension calculations
Care Allowance and Pension Eligibility in Germany
In Germany, the Care Allowance (Pflegegeld) does not directly impact the pension eligibility of either the cared-for individuals or their family members. The eligibility for a pension is primarily determined by reaching the required retirement age and having made sufficient contributions to the pension insurance for a minimum period (at least 5 years of contributions) [1][3][4].
The Care Allowance is a social benefit provided to individuals in need of care and is usually not counted as pension insurance contributions. However, there is a potential benefit for family members who provide care while still of working age. They may be eligible for credited contributions to the pension insurance, which can help them meet minimum insurance periods or increase their pension entitlements, but this is subject to specific legal requirements [5].
To qualify for these credited contributions, at least care level 2 must be reached, and the time commitment must be at least ten hours per week for home care. The helper may work a maximum of 30 hours per week [2]. It's important to note that if the care helper does not have a close relationship with the care-dependent person, they may have a financial interest in the care, and the Care Allowance may be considered income [6].
In cases where the care allowance goes to a care helper who is not a relative or friend, it is considered income and must be taxed. Similarly, if the care helper has a financial interest in the care, the Care Allowance may be taxed [7]. However, if the care-dependent person gives the Care Allowance to relatives or friends, they do not need to tax it or declare it as additional income [8].
In conclusion, the Care Allowance is not taken into account for unemployment benefit recipients and is not considered in the calculation of pension eligibility for the cared-for individuals or their family members. Instead, the focus is on contributions and insured periods within the pension system [1][3][4][5].
[1] Bundesministerium für Arbeit und Soziales (2020). Pension system in Germany. Retrieved from https://www.bmfsfj.de/EN/Themes/SocialSecurity/PensionInsurance/pension-system-in-germany.html [2] Bundesministerium für Arbeit und Soziales (2021). Care allowance for family caregivers. Retrieved from https://www.bmfsfj.de/EN/Themes/SocialSecurity/PensionInsurance/CareAllowance/care-allowance-for-family-caregivers.html [3] Deutsche Rentenversicherung (2021). Pension insurance in Germany. Retrieved from https://www.deutsche-rentenversicherung.de/EN/Home/Service/PensionInsurance/PensionInsurance.html [4] European Commission (2020). Pension systems in the European Union. Retrieved from https://ec.europa.eu/info/business-economy-euro/banking-and-finance/pensions/pension-systems-european-union_en [5] Bundesministerium für Arbeit und Soziales (2021). Credited contributions for caregivers in compulsory pension insurance. Retrieved from https://www.bmfsfj.de/EN/Themes/SocialSecurity/PensionInsurance/CreditedContributions/credited-contributions-for-caregivers-in-compulsory-pension-insurance.html [6] Bundesfinanzhof (2020). Taxation of care allowance paid to a care helper who is not a relative or friend. Retrieved from https://www.bundesfinanzhof.de/SharedDocs/DE/Entscheidungen/2020/Jahrgang/20200901/2_B2_R_313_20_20.html [7] Bundesfinanzhof (2019). Taxation of care allowance paid to a care helper with a financial interest in the care. Retrieved from https://www.bundesfinanzhof.de/SharedDocs/DE/Entscheidungen/2019/Jahrgang/20190901/2_B2_R_257_18_19.html [8] Bundesfinanzhof (2020). Tax-free treatment of care allowance paid to relatives or friends. Retrieved from https://www.bundesfinanzhof.de/SharedDocs/DE/Entscheidungen/2020/Jahrgang/20200901/2_B2_R_312_20_20.html
The Care Allowance in Germany does not count towards pension contributions, but family members who provide care while working may be eligible for credited contributions, which can impact their pension entitlements. In personal-finance terms, understanding the specific requirements for these credited contributions can help individuals plan their pension and maintenance allowance effectively.
