Bundesverfassungsgericht

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Cuts in the reduced earning capacity pensions are constitutional also where the pension payment starts before the recipient’s 60th year of age

Press Release No. 17/2011 of 18 February 2011

Order of 11 January 2011
1 BvR 3588/08

The monthly amount of a pension is calculated according to a pension formula. In one of the formula's calculation steps, all remuneration points which an insured person has acquired in his or her life are multiplied by what is called the age factor.

Until 31 December 2000, the age factor was 1.0 for reduced earning capacity pensions. The age factor was reduced by the Act for the Reform of the Reduced Earning Capacity Pensions (Reform der Renten wegen verminderter Erwerbsfähigkeit) of 20 December 2000. According to the version of § 77.2 sentence 1 no. 3 of the Sixth Book of the Code of Social Law (Sozialgesetzbuch Buch IV - SGB VI) applicable as from 1 January 2001, the age factor of 1.0 is reduced by 0.003 for every month in which the reduced earning capacity pension is drawn before the completion of the pensioner's 63rd year of age. If, however, the pension payment starts before the completion of the pensioner's 60th year of age, the completion of the 60th year of age remains the relevant date for determining the age factor, i.e. the preceding period of time in which the pension is drawn does not result in a further reduction. Thus, the restriction ensures that even if a pension is drawn before the completion of the pensioner's 60th year of age, the monthly pension amount will be reduced by 10.8 % at most.

To mitigate the effect of the pension cut, the legislature at the same time fully recognised the added period for insured persons from their 55th year of age, while until 31 December 2000 only a third of it had been recognised. The added period is the period which is added to a reduced earning capacity pension if the insured person has not yet completed the 60th year of age. Additional remuneration points are taken into account in the pension calculation in order to ensure a sufficient pension also in the case of premature disability.

Furthermore, transitional provisions were created which provided for a gradual introduction of the new legal situation, so that the age factor was fully reduced only for insured persons who started drawing their pensions as from 1 December 2003.

The complainants had been granted a pension on account of partially or fully reduced earning capacity. As the complainant in proceedings 1 BvR 3588/08 was only 51 years old when he started drawing his pension in 2005, the age factor was reduced according to the new legislation. As a result, the complainant's pension was reduced by approximately 3.18 %, taking into account the change concerning the added period. This corresponds to a monthly reduction by about 15 euros. For the complainant in proceedings 1 BvR 555/09, who was 57 years old when she started drawing her pension in July 2002, the pension reduction which was due to the new legislation ultimately amounted to approximately 3.88 %, i.e. to about 16 euros per month. As she had started to draw her pension before 1 January 2004, the transitional provision was applied to her pension. The respective actions brought by the complainants against the reduction of their pensions were ultimately unsuccessful before the Federal Social Court (Bundessozialgericht). By means of their constitutional complaints, they challenge a violation of their fundamental right to property under Article 14.1 of the Basic Law (Grundgesetz - GG), of the general principle of equality (Article 3.1 GG), and of the ban on discrimination under Article 3.3 sentence 2 GG.

The First Senate of the Federal Constitutional Court has rejected the constitutional complaints as unfounded. It held that the complainants' fundamental rights are not violated by the contested decisions of public authorities, by the contested court rulings and by the new provision on the age factor in § 77.2 sentence 1 no. 3 SGB VI.

In essence, the decision is based on the following considerations:

1. The introduction by § 77.2 sentence 1 no. 3 SGB VI of a reduced age factor if the payment of a reduced earning capacity pension starts before the completion of the pensioner's 63rd year of age concerns the area of protection of the fundamental right to property. The provision determines the content and the limits of property, while at the same time interfering with existing pension entitlements.

However, the provision is constitutional because it serves an objective of the common good and is proportionate. The new legislation on the age factor serves the legitimate objective of securing the funding of the statutory pensions insurance, thus maintaining and improving the viability of the statutory pensions insurance system and adapting it to the changed economic situation in everyone's interest. After introducing in 1992, by the Pensions Reform Act, reductions when an old-age pension is drawn prematurely, the legislature assumed that insured persons would preferably apply for a pension on account of reduced earning capacity instead of drawing a reduced old-age pension. The reduction of the age factor for reduced earning capacity pensions was intended to prevent such an evasion to reduced earning capacity pensions; furthermore, the reduction was intended as a reaction to pensions being drawn before the beginning of the standard age for old-age pensions, and thus was intended as a reaction to the involved extension of the pension term.

The reduction of the age factor was suitable and necessary for achieving this objective, and it does not disproportionately burden the complainants. It is true that they had not yet completed their 60th year of age when the new legislation entered into force. Hence, they had not complied with one of the prerequisites for prematurely drawing an old-age pension, so that in their case it was precluded from the outset that they had applied for a reduced earning capacity pension to avoid prematurely drawing an old-age pension. However, it can also be reasonably expected of the insured persons who apply for a reduced earning capacity pension before completing their 60th year of age to accept a reduction of the age factor because they do benefit from the increase in added time, which was introduced by the legislature at the same time, and from drawing their pensions earlier. Ultimately, this considerably mitigates the reduction of the reduced earning capacity pension for this group of insured persons, with the consequence that insured persons drawing a reduced earning capacity pension are burdened with considerably lower reductions than those insured persons who prematurely draw an old-age pension.

Furthermore, the principle of the protection of public confidence has been sufficiently taken into account by the transitional provisions created by the legislature.

2. As the determination of the content and limits of property in § 77.2 sentence 1 no. 3 SGB VI proves to be adequate, there is also no violation of the general principle of equality under Article 3.1 GG. The fact that the reductions of reduced earning capacity pensions are not nearly as high as those possible with old-age pensions and that they are even partly compensated by the increase in added times takes sufficient account of the circumstance that unlike the premature drawing of an old-age pension, access to a reduced earning capacity pension presupposes a fateful development of a person's state of health.

3. Finally, the complainants' complaint that the law treats them equally to non-disabled old-age pensioners with regard to the reductions of the age factor also cannot substantiate the existence of a violation of the ban on unfavourable treatment under Article 3.3 sentence 2 GG. On the one hand, the pensions law's concept of disabled persons is not identical to the general concept of disabled persons, focusing on participation in social life, towards which Article 3.3 sentence 2 GG is oriented. For the claim to a reduced earning capacity pension is exclusively based on the ensured person's abilities on the labour market; even a temporary illness may be sufficient for drawing such a pension. On the other hand, to the extent that it concerns disabled persons within the meaning of Article 3.3 sentence 2 GG, the provision of § 77.2 sentence 1 no. 3 SGB VI is still justified in comparison to other forms of unemployment because of the manner described above in which it takes health-related inability to work into account.