MW Expat - MW Expat

Explaining bAV: How to Boost Your Retirement Savings

Posted on October 25, 2023November 7, 2023 by MW Expat

Have you heard about the Betriebliche Altersvorsorge (bAV)? It’s a fancy term for company pension schemes in Germany, and they can really boost your retirement savings. But before you dive in, let’s take a closer look at what the bAV is all about, its perks, and the things you need to consider. Trust us, it’s worth understanding whether the bAV is the right choice for you.

Eligibility and Types of Employees

First things first, who can get in on the bAV action? Well, the good news is that all types of employees are eligible! Whether you’re a salaried employee, a trainee, a wage earner, a non-controlling share holder-manager of a GmBH, a member of a corporation’s board of directors, or an external person working exclusively for one company, the bAV is open to you. It’s not mandatory, but many folks choose it because of the awesome tax breaks and government subsidies it offers.

Contribution Options and Tax Benefits

Okay, let’s talk money. With the bAV, you can ask your employer to convert a part of your salary into the pension scheme. This is called “deferred compensation.” Up to 8% of your gross salary (with a maximum annual limit of €7,008) can be directly contributed to your bAV. And guess what? The best part is that before taxes and social security contributions, 4% of your gross salary is automatically deducted. You can even choose to have an additional 4% deducted, which lowers your taxable income. That means more money in your pocket!

Retirement Benefit Options

When it’s time to enjoy the fruits of your labor, you’ve got choices. You can go for a full lump-sum payout, where you receive your entire saved retirement capital at once. Or, you can opt for a partial lump-sum payout, where you get a chunk (usually around 30%) upfront and the rest as a lifelong pension. Lastly, there’s the lifelong pension option. Depending on how much you’ve saved, you’ll receive a fixed monthly amount until the end of your days. Pretty neat, huh?

Portability and Investment Management

Now, here’s some good news for job hoppers. If you switch jobs, you can take your bAV savings with you. That means you don’t have to start from scratch when you join a new company. Your savings will keep growing, just like you! The bAV works similarly to private pension insurances, and your employer can choose an insurance provider to handle the investment side of things. They’ll make sure your money is in good hands and growing steadily.

Legislation and Employer Contributions

Since your employer saves on your social security contributions, they are required to transfer those savings over to you by contributing them to your bAV. So, you’re not alone in building your retirement fund — your employer’s got your back!

Age of Eligibility and State Pension Implications

Now, let’s talk about when you can start reaping the benefits. If you signed up for the bAV after 2012, the earliest age you can claim the benefits is 62. But don’t worry, you don’t have to rush. Most folks choose to claim their bAV benefits when they become eligible for the full German state pension. Just remember that when you lower your social security contributions through the bAV, your contribution to the mandatory state pension is also reduced. It means your government-run pension might be a bit lower, but hey, it’s a trade-off for the extra savings you’ve accumulated!

Conclusion

Phew! That was a lot to take in, but we hope you now have a clearer picture of the Betriebliche Altersvorsorge (bAV) and how it can help you boost your retirement savings. It’s all about understanding the eligibility criteria, contribution options, investment management, and the impact on your state pension. So, take your time, weigh the advantages and disadvantages, and decide if the bAV is the right choice for securing your financial future. Your retirement self will thank you later!

How Social Security Has Evolved in Germany

Posted on October 11, 2023October 25, 2023 by MW Expat

Social security stands as a fundamental pillar in contemporary societies, providing a safety net for citizens in times of need. In Germany, this concept has a rich history that has evolved significantly over the years. From its origins in the late 19th century to the robust system in place today, Germany’s social security system has seen remarkable transformations.

In this article, we’ll take a journey through time to explore how social security in Germany has evolved.

Historical Background

Germany’s social security journey can be traced back to the late 19th century when Chancellor Otto von Bismarck introduced a pioneering social legislation package.

The German Chancellor was driven to implement social insurance in Germany with two main objectives: first, to enhance the welfare of workers, ensuring the optimal performance of the German economy, and second, to mitigate demands for more radical socialist alternatives.

In 1889, he established the world’s first old-age social insurance system, with a primary focus on pension benefits for industrial workers.

The German system included obligatory retirement and disability benefits, with contributions taken from employees, employers, and the government. This, combined with the workers’ compensation initiative introduced in 1884 and the “sickness” insurance program implemented the previous year, established a thorough income security system in Germany rooted in the principles of social insurance.

World War I

After World War I, there was swift progress in the expansion of social insurance programs across various regions. The concept of social protection found its place on the agendas of newly established international bodies, such as the ILO and the International Conference of National Unions of Mutual Benefit Societies and Sickness Insurance Funds, which originated in Brussels in October 1927 and eventually evolved into the International Social Security Association (ISSA).”

Weimar Republic and World War II

The Weimar Republic faced economic and political instability during the early 20th century, which had an impact on social security programs.

However, World War II brought about significant changes as the nation rebuilt itself after the devastation. The aftermath of the war saw the consolidation and expansion of social security initiatives to address the needs of a recovering population.

In 1944, the ILO’s historic Declaration of Philadelphia called for the expansion of social security measures. It also advocated for the international or regional promotion of systematic and direct cooperation among social security institutions, the regular exchange of information, and the examination of shared challenges concerning the administration of social security.

Just a year later, the United Nations General Assembly adopted the Universal Declaration of Human Rights, which, in Article 22, acknowledged that “Everyone, as a member of society, has the right to social security”.

Weimar Republic and World War II

The Weimar Republic faced economic and political instability during the early 20th century, which had an impact on social security programs.

Post-World War II Reforms

The post-war era witnessed extensive reforms in Germany’s social security system. Comprehensive social insurance systems, including health, pension, and unemployment insurance, were established to ensure the well-being of citizens. This period also saw the emergence of the social market economy, which played a pivotal role in shaping the country’s social security policies.

These reforms were not only designed to provide financial protection but also aimed to foster social cohesion and economic stability.

One remarkable reform during this period was the introduction of the “Sozialer Ausgleich” or “social compensation” policy. This initiative, implemented in the 1950s, aimed to balance income disparities by redistributing wealth through progressive taxation and social benefits. It was a key component of the broader effort to create a fair and just society in post-war Germany.

These post-World War II reforms laid the foundation for the robust social security system that exists in Germany today.

German Reunification and Social Security

The reunification of East and West Germany in 1990 posed unique challenges for social security. Integrating the social security systems of the two regions required careful planning and coordination. East Germany had its own distinct social security framework, developed during the years of the German Democratic Republic (GDR), which differed significantly from that of West Germany.

One of the most significant challenges was the merging of pension systems. East Germany’s pension system was based on a “pay-as-you-go” model, where current workers’ contributions funded the pensions of retirees. In contrast, West Germany had a more advanced and financially robust pension system.

Another area of focus during reunification was healthcare. East and West Germany had different healthcare systems with varying levels of coverage and infrastructure. The goal was to create a unified healthcare system that ensured equal access to medical services for all citizens.

Despite the complexities, the reunification of Germany’s social security systems symbolized the country’s commitment to ensuring that all citizens had access to the same level of social protection.

German Reunification and Social Security

Contemporary Social Security in Germany

Today, Germany boasts a comprehensive social security system that encompasses various components, including healthcare, pensions, unemployment benefits, and family support. This system is built on the principles of solidarity and sustainability, ensuring that resources are fairly distributed and that future generations can benefit from the system.

Reforms and Challenges

In recent years, Germany has faced the challenge of an aging population, leading to discussions about the sustainability of its social security system. Policymakers are continually evaluating and reforming various aspects of social security to adapt to changing demographics and economic realities.

Pension Reforms. One of the primary areas of reform has been the pension system. As the population ages and the ratio of retirees to active workers increases, there is growing concern about the financial sustainability of the “pay-as-you-go” pension model. To address this, Germany has implemented reforms to gradually increase the retirement age, encouraging individuals to work longer before claiming their pensions. Additionally, adjustments to pension calculations have been made to align benefits more closely with lifetime earnings.
Long-Term Care Insurance. With an aging population, the demand for long-term care services has surged. To meet this challenge, Germany has introduced reforms to expand and enhance long-term care insurance. These reforms aim to provide better coverage and support for those in need of care while relieving some of the financial burden on families.
Labor Market Integration. Encouraging labor force participation, especially among older individuals and women, has been a focus of recent reforms. Politicians have introduced measures to promote flexible work arrangements, lifelong learning, and retraining to ensure that people can remain economically active for longer periods
Healthcare Sustainability. Healthcare costs have been on the rise due to advances in medical technology and the aging population. Reforms have aimed at improving the efficiency and cost-effectiveness of healthcare delivery while maintaining high-quality care. Initiatives such as cost containment measures and the promotion of preventive healthcare have been implemented.

In conclusion, the evolution of social security in Germany reflects the nation’s commitment to the well-being of its citizens. From its inception in the late 19th century to the present day, Germany’s social security system has grown and adapted to meet the needs of its people. As the country faces new challenges and opportunities, it remains dedicated to providing a strong safety system for all its citizens, ensuring that social security continues to play a vital role in its society.

Mandatory and Recommended Vaccinations in Germany

Posted on August 10, 2023August 10, 2023 by MW Expat

Vaccinations in Germany

Vaccines are some of the most effective preventive measures to protect against infectious diseases. Although they are not compulsory in Germany (with one exception that you will find later in this article), all health authorities strongly recommend it.

The Standing Commission on Vaccination (STIKO) at the state-run Robert Koch Institute decides which vaccinations are recommended in Germany. The Federal Ministry of Health (Bundesministerium für Gesundheit) appoints the members of STIKO, who are primarily doctors from university hospitals. The current and up-to-date recommendations on vaccinations are always available on the website of the Robert Koch Institute, which is also available in English.

Is it compulsory to be vaccinated in Germany?

If you recently moved to Germany and are planning to start a family in the country, you should be informed about the vaccines that you and your children may need.

As we mentioned before, unlike other European countries, there is no compulsory vaccination in Germany. However, there is one exception to the rule: the measles vaccination. The Measles Protection Act, which came into force on March 1, 2020, is intended to provide school and kindergarten children with effective protection against measles. However, regardless of this, it is important to educate people about the importance of vaccination and to make vaccination easily accessible to all citizens.

Having said this, the Federal Ministry of Health and the Robert Koch Institute recommend the following vaccinations for all citizens living in the country:

Vaccine recommendations for children and adolescents in Germany

Diphtheria
Tetanus
Poliomyelitis (polio)
Haemophilus influenzae type B (Hib)
Pertussis (whooping cough)
Hepatitis B
Measles, mumps, rubella (MMR)
Chickenpox
Rotavirus, pneumococcal infection
Meningococcal C infection
HPV (human papillomavirus)

Booster vaccinations for adults in Germany

Booster against diphtheria and tetanus (recommended every ten years)

Booster against measles (people over the age of 18 who were born after 1970 and are unsure of their vaccination status, have not been vaccinated, or have received only one vaccine as a child).

Vaccine recommendations in Germany for people over the age of 60

Influenza
Pneumococcal infection
Herpes zoster (shingles)
Further vaccinations for unvaccinated adults after consultation with a doctor

The COVID-19 vaccine

The introduction of a mandatory vaccination program for the entire population in Germany was heavily debated, but it was unsuccessful in the German parliament’s Bundestag. When it comes to making COVID-19 vaccinations a requirement, Germans place a high value on self-determination and freedom of choice. According to a survey that was carried out, 63 % of Germans agree that vaccinations are a matter of personal autonomy that the state cannot interfere with, even during a pandemic. However, the majority of the German population is vaccinated against COVID-19: 78 % of people have received at least 1 dose and 76.4 % of Germans are fully vaccinated.

The vaccination record or Impfpass

The vaccination record, also known as the Impfpass, is a yellow booklet that is given to you after you are vaccinated for the first time in Germany. This booklet contains a record of all your vaccinations, making it easier for you to keep track of all your vaccines.

In addition to the vaccination record, you can get a second record book for your children (also known as a Kinder-Untersuchungsheft) for pediatric medical examinations. All of your child’s medical check-ups and assessments will be recorded in this booklet up until the age of six. You receive this booklet shortly after delivery.

Who covers the cost of vaccines?

The statutory health insurance funds in Germany (GKV) spend about 1.4 billion euros annually on vaccinations (as of 2017, according to the Federal Ministry of Health). Therefore, people who have statutory health insurance are entitled to the vaccinations that are recommended in Germany at no additional cost.

If you’d like to find out more about your health insurance coverage and how you might be able to optimize it, our team of experts will be happy to advise you. Contact us here!

Vaccines are extremely efficient not only because they provide individual protection, but also because they lead to herd immunity, protecting a large part of the population against diseases.

We hope that you found this article useful and it helped you learn more about vaccination in Germany. We must never forget that countless deaths are prevented worldwide thanks to vaccines, so we should stay protected!

How to Insure Your Family in Germany

Posted on June 27, 2022April 3, 2023 by MW Expat

As an expat coming to Germany, you should know that registering for health insurance is one of the most important things you need to take care of before moving to the country. Health insurance is compulsory for everyone living in Germany. Therefore, if you’re planning to bring your relatives with you, we would like to offer you all the information on how to insure your family in Germany.

How does family insurance work in Germany?

First of all, you should know that there are two main types of health insurance in Germany: public health insurance (or statutory health insurance) and private health insurance (usually known as PKV in German). No matter what kind of insurance you’re registered at, all family members must also be insured.

The German health care system includes certain regulations for family insurance in order to make sure that everyone is equally covered. There is a so-called family co-insurance, in which dependent family members, such as spouses and children, are eligible to enrol for free with the health insurance provider in which the main family member is already insured. This is due to the fact that it is common for family members to remain unemployed for a while after they move to Germany.

Who can benefit from free family co-insurance?

Expats’ partners who receive no income or an income that does not exceed 470 euros per month (as of 2022) are eligible for this aid. In addition, partners who earn 450 euros with a part-time job or find themselves under marginal employment can also be covered at no cost.

Children are normally insured free of charge until they reach the age of 18. However, this age limit might be raised under certain conditions:

If they are unemployed, they can be insured up to 23 years old.
If they are still enrolled in school, vocational training or are doing voluntary programs, they can be insured up to 25 years old.
If their education was interrupted by military or civilian service, they can be insured over 25 years old.
Permanently disabled children do not have an age limit to be covered free of charge.

What are the steps to insure your family in Germany?

Regardless of your relatives’ situation, you will have to fill in and send a form to your health insurance provider to include them in your insurance coverage. In this form, you have to specify the members you want to include, their previous economic situation and their current incomes.

If the family members you are planning to bring to Germany will work in the country, you will have to pay additional costs to insure them. In order to calculate the premium you will pay as a family, your health insurance will evaluate your partner’s gross salary as an employee, including regular annual bonuses; their income as freelancers (if applicable) and their income from investments, rentals or similar, as well as those coming from retirement insurance.

However, this is something your health insurance provider will take care of. You don’t need to worry about anything!

What kinds of insurance should families have?

As a rule of thumb, you should insure everything that could put you in an existential risk as a family. There is a list of different insurances that are not compulsory in Germany, but highly recommended for families.

Liability insurance. If you cause damage to someone else, you will be liable for it. In the worst case, this could lead to financial problems. The price you pay for this insurance is usually around 40-60 euros a year, which is why most families opt for it.
Disability insurance. Occupational disability insurance covers you if you lose your income due to occupational disability.
Term life insurance. Term life insurance secures the family income if one parent dies.
Homeowners insurance. Homeowners insurance offers homeowners protection in the event of damage that could threaten their property or assets (e.g. storm, lightning, explosion, etc.). We only recommend this type of insurance if you own a house.
Objects insurance. Household objects insurance covers damage to the contents of your flat or house.

We hope that this article helped you understand how to insure your family in Germany. If you want to find out more information, do not hesitate to schedule a call with our insurance experts at MW Expat.

The German Pension System: The Ultimate Guideline

Posted on June 17, 2022April 3, 2023 by MW Expat

As an expat coming to Germany, we understand that the German pension system can be hard to understand. If you come to work in the country and are employed, you will contribute to the pension system, just like every other citizen. Does this sound too confusing? Read this article to better understand how the pension system works in Germany for expats!

What is the German pension age?

The German pension system is experiencing some major changes in terms of retirement age. Nowadays, the official retirement age for women is 65 years and 67 years for men. Over a transition period from 2012 to 2029, this will gradually climb up to official retirement age. In addition, an early retirement is possible in Germany if you have worked for at least 35 years. However, for every year that you retire earlier than planned, 3.6% of your pension will be deducted. At the moment, 4 employees finance 1 retiree in Germany.

First step: taxation

First of all, you should be aware that all pensions are taxable in Germany. What does this mean? This means that you must declare all pension payments you get to the tax office, whether it is in Germany or in a foreign country. These payments may include a state pension, occupational pension scheme, Riester pension or private pension insurance.

In some cases, your pension could be subject to double taxation, which occurs when both Germany and your place of residency tax your pension income. As a result, you must determine whether the two nations have a double tax agreement in place.

In addition, as soon as you’ve paid into your pension for more than five years, you will receive an annual pension information letter with your pension balance and further information.

What is a mandatory state pension?

In Germany, the mandatory state pension (statutory pension) is known as the Gesetzliche Rentenversicherung (GRV). Employees contribute to the German state pension through payments to the German social security, where a proportion of the wage is paid. Instead of being saved or invested, these compulsory contributions are reallocated to pay for existing pensioners. The system is subsidized through the German state.

For expats who decide to leave Germany, two scenarios may occur. On the one hand, it might be possible to get a return on your half of the pension contributions to the state. If you have paid into the German pension scheme for less than five years, you can get half of your saved retirement back (only half of it, since 50% is paid by the employee and 50% by the employer; you can only get the amount paid by the employee back). You can receive this right away, but you have to submit a request for it.

On the other hand, if you have contributed to the German pension system for more than five years, you have to wait until you reach retirement age before you receive your German pension abroad. In this case, you will get the full retirement amount you saved for the time that you were contributing into the system.

However, the statutory pension insurance is not enough and it is usually advised to supplement it with a private pension fund. Contact us for a free consultation today to find out more information about this.

What is a Riester pension?

The Riester pension is one of the most complex parts of the German pension system. The Riester pension is a state-subsidised private pension plan. This is how it works: as an individual, you contribute to a private pension contract, bank savings plan or fund during your active working life. This way, you get state allowances, tax advantages and a monthly pension for the rest of your life.

What happens if you are still contributing with your Riester pension and you decide to leave Germany? Since these financial benefits are directly linked to your residency in the country, you are no longer eligible for additional subsidies and allowances from the German government. If you move to another EU country, you will not be required to repay anything and will be able to claim the benefits of the plan when you retire.

However, for non-EU citizens, the German government would expect you to repay any state contributions made to your Riester account by the time you retire. Taking this into account, the Riester pension system is only convenient for people who plan to stay in Europe for their whole lives.

What is a basis pension (Rürup) and BAV?

The basis pension, sometimes known as the Rürup pension, is named after its “creator”, Prof. Rürup. The Rürup pension was established to allow self-employed people and freelancers to save for retirement in the same way that employees do.

Moreover, a company pension scheme (bAV = betriebliche Altersvorsorge in German) is the creation of a supplementary pension through the employer from contributions of the employer, the employee, or both combined.

For expats who leave Germany, we have good news: both pensions can be transferred abroad.

What is a private pension insurance?

The private pension insurance (Private Rentenversicherung) is made up of individual pension investment plans set up by banks and insurance companies to raise your overall German pension entitlement when you reach the retirement age. There are good news for expats who leave the country: you can get your private pension in every foreign country around the world without any complications or deductions.

We hope that this article helped you better understand the way the German pension system functions and how you can take advantage of it as an expat. If you wish to learn more information concerning your personal options, contact us here!

Student Health Insurance: A Guide for Studying in Germany

Posted on April 27, 2022April 3, 2023 by MW Expat

International students hoping to complete their education in Germany need to have Germany’s healthcare insurance before enrolling in school and obtaining a residence permit. German student health insurance is designed to be reasonable. The country requires students to pay the standard discounted sum for their insurance unless they have a job.

How to Get Health Insurance as a Student in Germany

Before arriving in the country, you will apply for a German student visa from a German embassy in your city. You will need a short-term travel health insurance plan to cover you for your initial stay while you procure your long-term international healthcare insurance. Then, before enrolling at your chosen university, you will need to contact a Krankenkasse, i.e., a health insurance company. Your chosen company will give you their plan and relevant details. You can study the plan and coverage and choose the student health insurance that works best.

What Should Your Student Health Insurance Cover?

Your student healthcare insurance in Germany should cover the following:

In-patient and out-patient care
Regular medical check-ups
Medicine costs
Emergency services
Basic dental care
Pregnancy treatment
Funeral costs and repatriation of remains costs in case of death

Choices for Student International Healthcare Insurance in Germany

Germany offers two types of health insurance – public and private. Your eligibility for them depends on your age and education status. Let’s explore these two options:

Public Health Insurance for Students

Students under 30 enrolled in degree courses in Germany must have public health insurance. You cannot register at your university without a statutory/public health insurance certificate. Students in Germany only have to pay around 110 per month as their premium until they turn 30.

However, you cannot register for Germany’s statutory health insurance if:

You already have an EU health insurance in your home country
You are over 30
You are self-employed or working as a freelancer
You are not enrolled in a degree course in the country

Important Note: If you reside and work in Germany while studying and earning more than €450 each month, you will need to avail health insurance as a foreign worker.

Suppose you wish to benefit from private health insurance as a student under 30. In that case, you will have to request an exemption certificate from the statutory health insurance within the first three months of starting your studies. Once you forfeit your public insurance, you cannot revert to it for the duration of your education unless you start earning and register yourself as an employee.

On the flip side, you can get public health insurance without technical eligibility if you are:

Enrolled in compulsory training after getting your degree
Have to care for sick or disabled relatives
Have a disability or illness
Participate in a board conducted by your university
A recent parent

Private Health Insurance for Students

You must purchase private health insurance in Germany if you are:

Over 30
Enrolled in a language or preparatory course
A PhD student

Moreover, if you were covered by statutory health insurance before your PhD program, you can keep it or get private insurance. Since public insurance only covers basic needs, many students opt for additional private health insurance.

Getting Proof of Student Health Insurance in the Country

Germany’s healthcare system requires you to have proof of your student health insurance. You will need to contact your private health insurance company and request an insurance certificate as proof. It will contain your insurance plan, coverage, and other details. With a private insurance plan, you will need proof from the public health insurance provider in your area that you are exempt from statutory health insurance and that your current private plan meets your needs.

Health Insurance for Language or Preparatory Course Students

In Germany, international students pursuing a preparatory course cannot obtain public health insurance. Instead, they need to have private health insurance until they pass their course exam known as Feststellungsprüfung, enabling them to enrol in a degree program. That is when they will become eligible for statutory health insurance.

Students pursuing a language course are not eligible for public health insurance. They will become eligible once they enrol in a degree programme or find employment.

Health Insurance for Exchange Students

Exchange students studying in Germany are enrolled in degree programs, enabling them to benefit from public health insurance. They can use the discounted amount like full-time international students despite studying in the country for a semester or two.

Health Insurance for PhD Students

PhD students studying in Germany are typically over 30 years of age, which means they are not eligible for statutory health insurance. However, the type of health insurance they are eligible for depends on their employment status.

PhD. Members Teaching at a University

When a PhD student is employed at a university as a research assistant or lecturer, they will need to pay 7.3% of their salary, and their employer will match the percentage. Moreover, PhD students teaching at a university are often insured as employees in public insurance plans by the university as their payroll is not above the threshold to register with private insurers.

Non-Teaching PhD Students

PhD students who are not staff members and are less than 30 years old are eligible for the discounted statutory health insurance. However, students over 30 should seek private health insurance providers. But if they are working part-time in any institute, they can consider registering for public health insurance through their employer.

MW Expat offers convenient public and private health insurance to students studying in Germany. Together with our student insurance partner BARMER we will help you to find the best solution for your personal situation. Get in touch with us today to learn more!