The recognition of notional insurance time is one of the most popular options for insured persons who wish to establish retirement entitlement more quickly or increase the final amount of their main pension. However, the basic question that concerns every interested party is the financial one: How much does the buyout cost, how much does the monthly pension increase, and how long does it take to recoup the money?
To make the mechanism understandable, let us examine a specific and representative example of an insured person with 36 years of actual service. This particular employee chooses to recognize 48 months of notional time (that is, 4 additional years), in order to complete the critical 40 years that lead to full retirement. With a final gross salary of 2,000 euros, the total cost for the buyout of the 4 years amounts to 19,200 euros.
If the insured person were to leave with 36 years, their gross main pension would amount to 1,243 euros, which after health and tax deductions translates into 1,088 euros net in hand. With the addition of the 4 notional years and the completion of 40 years of insurance, the gross pension is upgraded to 1,447 euros. After the corresponding withholding of tax and health contribution, the net monthly pension amounts to 1,238 euros.
The benefit is immediate and tangible, as the pensioner gains an additional 150 euros net every month. Dividing the total cost of 19,200 euros by the monthly net gain of 150 euros, it follows that the payback period of the investment is 128 months (that is, about 10.5 years). After the end of this period, the increase constitutes pure profit.
To calculate your own case and see the buyout cost based on your own years and your salary, click here.