Federal Constitutional Court  - Press Department -

Press release no. 102/2008 of 4. December 2008

Order of 11. November 2008
– 1 BvL 3/05, 1 BvL 4/05, 1 BvL 5/05, 1 BvL 6/05, 1 BvL 7/05 –

The favourable treatment of insured persons with 45 obligatory contribution
 years and reductions in old-age pensions drawn early are constitutional


On 11 November 2008, the First Senate of the Federal Constitutional
Court ruled on five submissions by the Federal Social Court
(Bundessozialgericht) which related to the early drawing of old-age
pensions. The Senate regarded it as compatible with the general
principle of equality that insured persons born before 1 January 1942
who have paid obligatory contributions to the pensions system for 45
years are favoured by the law when they draw old-age pensions. At the
same time, the judges established that reductions in old-age pensions
which are drawn early do not violate the guarantee of property or the
general principle of equality. 

The plaintiffs of the five original proceedings applied for the early
payment of old-age pensions from reaching the age of 60 pursuant to §
237 of the Sixth Book of the Code of Social Law (Sozialgesetzbuch VI -
SGB VI) on account of unemployment or part-time work leading into
retirement. Due to the reduced age factor, they only received reduced
pensions. Four of the plaintiffs were born before 1 January 1942; they
did, however, not meet the precondition of 45 obligatory contribution
years to qualify for a more favourable pension payment. The Federal
Social Court suspended all proceedings pursuant to Article 100.1 of the
Basic Law (Grundgesetz - GG) and submitted to the Federal
Constitutional Court the question whether the above provisions are
compatible with the Basic Law.

The decision is essentially based on the following considerations:

§ 237.4 sentence 1 no. 3 SGB VI does not violate Article 3.1 GG.
Persons insured under the statutory pension insurance can continue to
claim the favourable lower age limits set out in the Pensions Reform
Act 1992 if they were born before 1 January 1942 and have made
obligatory contributions to the statutory pension insurance for 45
years. In relation to a specific age, this reduces the number of months
in which a pension is drawn early, which leads to a lower reduction of
the age factor pursuant to § 77.2 sentence 1 no. 2 letter a SGB VI than
is the case for other insured persons of the same age; this has the
consequence that more personal remuneration points are entered into
their pension formula than for the other insured persons.
Differentiating according to whether an insured person has accumulated
45 obligatory contribution years thus leads to the unequal treatment of
two groups of insured persons. The unequal treatment is, however,
justified for factual reasons because with the requirement of 45
obligatory contribution years, the legislature has created a time-based
qualifying condition, which is not alien to the statutory pension
insurance system. In the statutory pension insurance, the duration of
insurance periods has always been a determining factor for the accrual
and the calculation of pensions. Moreover, an insured period of 45
years is not an unusual calculation factor in the statutory pension
insurance. In this context, what is known as the "reference pensioner"
(Eckrentner), i.e. an insured person who for 45 years makes
contributions to the statutory pension insurance whose amount results
from the annual average income of all insured persons, which changes
every year, serves as a basis for comparison which allows to follow the
development of the pension amounts in the statutory pension insurance
over the years. The privileged treatment of insured persons with 45
obligatory contribution years is justified by their long-term and
calculable contributions to the financing of the statutory pensions
insurance. Judging by the length, continuity and amount of their
contributions, persons who are obligatorily insured in the statutory
pension insurance have, as a general rule, contributed to the community
of insured persons to a higher degree than voluntarily insured persons,
without having the possibility of avoiding such obligation that
voluntarily insured persons have. This makes the obligatorily insured
persons, with whose contributions the statutory pension insurance
system can reckon in a continuous and calculable manner, the mainstay
of the statutory pensions insurance's financing.

Also § 237.3 in conjunction with § 77.2 sentence 1 no. 2 letter a SGB
VI does not infringe constitutional law. The provisions on the
determination of reductions in the case of old-age pensions which are
drawn early due to unemployment or after part-time work leading into
retirement constitute an admissible determination of content and limits
pursuant to Article 14.1 GG. The restriction of the pension entitlement
which results from the provisions on reduction is justified by reasons
of the common good and complies with the requirements of the principle
of proportionality. On the one hand, pension entitlements are reduced;
on the other hand, the early drawing of a pension is cost-neutral for
the community of insured persons and thereby secures the statutory
pension insurance's basis of financing. By introducing an age factor
which reduces an old-age pension that is drawn early the legislature
has chosen a means which imposes the costs of an early drawing of
old-age pensions, which before the Pension Reform Act 1992 burdened all
insured persons, solely to such insured persons who actually draw an
old-age pension early. It was also within the legislature's freedom of
drafting to determine the age factor pursuant to § 77.2 sentence 1 no.2
letter a SGB VI according to the actuarial calculation methods which it
had chosen.. Measured against its own concept, the legislature did not
disregard reality or determine the figures arbitrarily when fixing the
calculation quantities. Apart from this, drawing a pension early is
connected with the advantages of early retirement. In all five original
proceedings, insured persons, when deciding whether to accept a start
of the pension payment which would result in reductions, could
determine the point in time of their pension application without any
restrictions and thus themselves influence the amount of the
reductions. A lasting pension reduction if a pension is drawn early is
appropriate when weighed against this increase of individual freedom in
old age.

The introduction of an age factor that results in lasting reductions of
an old-age pension if it is drawn early also complies with the
principle of the protection of public confidence under the rule of law.
The plaintiffs of the original proceedings, who were born in the years
1941 and 1942, had to expect that in view of the financial stringency
of the statutory pension insurance in the 1990s, the legislature could
be required to make even further-reaching amendments to the
transitional concept of the Pensions Reform Act 1992, which had been
planned with a long-term view, to secure the basis of financing of the
statutory pension insurance. Under these circumstances, a confidence
worthy of protection in the continued existence of the terms of the
transitory arrangement could not arise in this context. 

To the extent that Article 3.1 GG was the subject of the questionsubmitted and to the extent that the Federal Social Court put
forward the argument that a pension reduction takes place even if the
individual advantage of a pension drawn early will be offset, in terms
of figures, at an age of 87 years and 10 months, this argument already
runs counter to the basic principles of the statutory pension insurance
as a mutually supportive community. Risk sharing takes place within the
community of insured persons as is the case with every insurance. Apart
from this, it must be taken into account that according to the
mortality table 2005/2007, the average live expectancy in Germany has
increased, but that according to the relevant statistics, the average
total lifespan of 60-year-old insured persons is still considerably
below the limit of 87 years and 10 months which has been calculated by
the Federal Social Court.