Basis Rente (Rürup Rente)
In Germany, Basis Rente, also known as Rürup Rente, is a tax-advantaged retirement savings option designed to provide long-term financial security. Tailored for self-employed individuals and high earners, Basis Rente offers tax benefits and flexible contribution options to help individuals build a reliable pension fund for retirement.
Key Features Of Basis Rente
- The Basisrente was introduced in 2005.
- It is also known as the Rürup Rente after the person who introduced it.
- In the 1st layer provident expenses can be offset against tax. Contributions made to the state pension scheme and to Basisrente can be offset to a maximum total of €27,565.00 a year for singles and €55,130.00 a year for couples (married or registered partnerships). A single person with a salary of €85,000 a year pays (including employer contributions). The maximum amount of €15,735.60 in to the German state pension system, meaning he still has an amount of €9903 per year (or €825,25 a month), which he can offset against tax with his Basisrente.
- Starting this year (2024), 100% of the contributions can be offset against tax.
- It is possible to have a small monthly contribution and then at the end of the year to pay a lump sum to take full advantage of the tax benefits.
- The monthly pension received is taxable at the personal tax rate for the pensioner. As a pensioner in Germany you have different tax regulations compared to when you are working. It is possible to pay in over and above the €27,565.00/€55,130.00 limits, the access, however, will provide no tax benefit.
- The majority of Basisrente products are fund-based. The products themselves offer a wide range of funds to choose from including managed portfolios. The advantage that insurance based products offer is that you can switch funds at least 12 times a year free of charge.
- Capital cannot be borrowed against a Basisrente, nor can there can be a seizure of the value. It is protected against unemployment and insolvency.
- The minimum duration of the contract is 5 years. The pension is guaranteed for the rest of the policy holders life. There is no option of drawing a capital sum. A pension can be first drawn at the age of 63 via a bank account in Germany.
- In case of death during the paying-in phase, the amassed amount will be converted and paid to the legal beneficiary. In case of death whilst drawing the pension, the pension will be paid out to the beneficiary for the arranged amount of time (Garantiezeit). The guaranteed payout time can vary between 5 and 18 years, obviously it has a small effect on the amount of monthly pension that can be drawn.
- The only qualified beneficiary in case of death is the spouse (or registered partner) or the children until they have finished their first education (max. up to the age of 25).
- Should the policy holder leave Germany, his Basisrente policy will be set to non-contributory. The balance will still work for the policy holder as his investment in funds continues. Ideally the policy holder will still have a post forwarding address in GermanySinc
For whom is the Rürup pension worthwhile?
The Rürup pension, also known as the basis pension, is particularly beneficial for self-employed individuals, freelancers, and high-income earners who are looking for tax-efficient retirement savings options. Due to its tax advantages and flexibility, the Rürup pension can also be suitable for individuals with fluctuating incomes or those who anticipate higher tax burdens in retirement.
How does the Rürup pension work?
The Rürup pension operates as a tax-advantaged retirement savings vehicle in Germany. Individuals contribute to their Rürup pension plans, and these contributions are tax-deductible, subject to certain limits. The accumulated funds are invested in fund-based products, offering a range of investment options. Upon retirement, the Rürup pension provides a lifelong pension income, which is taxable at the individual’s personal tax rate.
How long is the Rürup pension paid?
The Rürup pension provides pension payments for the rest of the policyholder’s life, ensuring financial security throughout retirement. The duration of Rürup pension payments is not limited by a specific term, unlike some other pension products. This lifetime income stream offers stability and peace of mind, making the Rürup pension a popular choice for long-term retirement planning.
What is the difference between Riester and Rürup?
The key difference between Riester and Rürup pensions lies in their eligibility criteria, tax treatment, and contribution limits. While both pensions offer tax advantages, Riester pensions are primarily designed for employees and certain eligible groups, such as civil servants and soldiers, who receive government subsidies. In contrast, Rürup pensions are geared towards self-employed individuals and high-income earners, offering tax deductions on contributions. Additionally, Rürup pensions have higher contribution limits compared to Riester pensions, making them suitable for individuals seeking tax-efficient retirement savings options tailored to their specific circumstances. Ready to explore the best pension plan for your needs? Contact MW Expat today for expert guidance tailored to your financial goals.
You can pay up to €27,535.00/year into the scheme if you are single or up to €55,130.00 if you are married
The premiums can be offset against tax. You have the option of paying low monthly premiums and then towards the end of the year, after seeing how much you will earn, paying a lump sum to save paying taxes. It pays out as a life long pension and the earliest that the pension can be drawn is age 63. The pension will be liable for tax at the rate you pay as a pensioner. There is no option of receiving a capital payment.
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