Basis Rente

MW-Expat - Pension Savings

This scheme is designed for the self-employed to benefit from, but it is also attractive to people on a higher salary. You can pay up to €25,046/year into the scheme if you are single or up to €50,092 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 oftheyear, after seeing how muchyou will earn, paying a lump sumto save paying taxes. It pays out as a lifelong 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 a capital payment.

Key Features

  • The Basisrente was introduced in 2005.
  • It is also known as the Rürop 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 €24,305 a year for singles and €48,610 a year for couple (married or registered partnerships). A single person with a salary of €85,000 a year pays (including employer contributions) The maximum amount of €14,954 in to the German state pension system, meaning he still has an amount of €9,350 per year (or €779 a month), which he can offset against tax with his Basisrente.
  • This year (2019) 88% of the contributions can be offset against tax. This value will rise by 2% every year until the year 2025, where 100% can be offset. The value rises automatically regardless of when the policy began.
    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 a 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 €24,305/48,610  limits, there will however be no tax benefit.
  • More 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 capitalization and a pension can be first drawn at the age of 62 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 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 beneficiary permitted 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 Germany.
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