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Germany's Pension Transfer Process

Germany’s Pension Transfer Process: A Guide for Expats

Germany’s pension system is known for its stability and reliability, but for expats moving to or from Germany, understanding how to transfer pensions can be a complex process. Learning about how to transfer or port your pension when necessary is key for long-term financial security. In this article, we will guide you through the Germany’s pension transfer process when changing jobs or moving to and from Germany, as well as pension portability across different countries.

Overview of the German Pension System 

The German pension system is divided into three pillars: the statutory pension (gesetzliche Rentenversicherung), occupational pensions (Betriebsrente), and private pension schemes. The statutory pension is mandatory for most employees and funded through social security contributions. Occupational pensions are offered by employers, and private pensions are voluntary retirement savings plans.

Expats working in Germany contribute to the same pension fund, which entitles them to a portion of retirement benefits once they reach retirement age, assuming they’ve contributed for at least five years. For this reason, it’s critical to understand the differences between the German system and your home country’s pension policies in order to complete your Germany’s pension transfer process, particularly how they affect your ability to transfer and retain benefits.

Germany's pension transfer process
Germany's pension transfer process

Germany’s Pension Transfer Process When Changing Jobs 

When you change jobs in Germany, your contributions to the statutory pension system are not lost. They remain in your pension account, and your new employer will continue to contribute on your behalf. You do not need to take any action to transfer these contributions, as they are automatically linked to your social security number.

If your previous employer offered an occupational pension, transferring these funds depends on the specific plan. Some occupational pensions allow for transfer to a new employer’s scheme, while others may require you to leave the funds with your previous employer or transfer them to a private pension scheme.

Portability of Pensions for Expats Moving to Germany 

For expats moving to Germany from another EU country, pensions are portable thanks to EU regulations. This means that your pension contributions from other EU countries can be combined with your German pension contributions when calculating your total pension benefits at retirement. The same applies to countries that have bilateral agreements with Germany, such as the United States, UK, and Australia.

If you are moving from a non-EU country that does not have a pension agreement with Germany, your pension contributions may not be transferable. In such cases, you may need to maintain separate pension accounts in each country or consider other financial planning options.

Transferring Pensions From Germany to Another Country

If you are planning to move out of Germany, you can transfer your pension contributions to the pension system of your new country of residence if there is an agreement in place. For EU countries, the process is straightforward and your German pension contributions will be recognized in your new country.

If you retire outside of Germany, you can still claim your German pension. Your pension will be paid into your bank account, regardless of where you live, although tax rules may differ depending on your country of residence. Be sure to check if your new country has a tax treaty with Germany to avoid double taxation.

Transferring Pensions When Moving to a Non-EU Country

If you’re moving from Germany to a non-EU country, your ability to transfer your pension will depend largely on whether there is a bilateral social security agreement between Germany and your destination country. These agreements help avoid the loss of pension rights and often prevent double taxation on pension benefits.

 

  • Check for bilateral agreements. Visit the German pension authority website to check if Germany has a social security agreement with your destination country.
  • Consult with experts. Pension specialists can provide tailored advice on how to handle your Germany’s pension transfer process when moving to a non-EU country.
  • Apply for transfer. Follow the formal process outlined by both the German pension authority and the pension system in your destination country.
In many cases, non-EU expats may need to withdraw their pension contributions upon leaving Germany, depending on the terms of any agreement or lack thereof.

Tax Implications of Germany’s Pension Transfer Process

Germany has specific tax rules regarding pensions, which apply both during contribution periods and when receiving pension payments. Pension contributions are typically tax-deductible, but pension payments are subject to income tax upon retirement.

When transferring pensions between countries, tax implications vary depending on whether the countries have a double taxation agreement (DTA). DTAs prevent you from being taxed twice on the same pension income. Be sure to consult a tax advisor to understand the tax consequences of your Germany’s pension transfer process.

Transferring Private and Occupational Pensions (Betriebsrente)

 If you have a private pension or an occupational pension from your employer, the process for transferring these funds can vary. Some private pensions are fully portable across jobs and countries, while others may require you to continue contributing to the same plan even after you’ve left the employer.

For occupational pensions, the rules depend on the specific scheme. In some cases, you can transfer your pension to your new employer’s plan, while in others, you may need to leave the funds with the previous employer and open a new plan with your current employer.

Key Steps in the Germany’s Pension Transfer Process for Expats 

Transferring your pension, whether within Germany or internationally, involves several steps. Here is a step-by-step guide that you will find useful through your Germany’s pension transfer process:

  • Contact your current and future employers to understand their pension schemes and the possibility of transferring funds. Gather the necessary documents, including your pension statements, employment contracts and identification. If transferring pensions internationally, contact the pension authorities in both countries to understand the process and any bilateral agreements. 
  • Consult a pension advisor or tax expert that works with expats to ensure you understand the tax implications of transferring your pension. Submit the required forms to the relevant pension authorities and keep copies of all correspondence for your records.

Understanding Pension Gaps and How to Avoid Them 

Pension gaps occur when you are not contributing to a pension system, either because of unemployment, gaps between jobs or moving between countries. These gaps can reduce the total amount of pension you receive at retirement. To avoid pension gaps throughout your Germany’s pension transfer process, ensure that you continue contributing to a pension system during periods of transition. This may involve making voluntary contributions to the statutory pension system in Germany or maintaining contributions to a private pension plan while you are between jobs or living abroad.

Can You Claim a Lump Sum for Pension Contributions? 

In some cases, expats may be eligible to claim a lump sum payment of their pension contributions if they leave Germany and do not plan to return. However, this is subject to strict rules and is generally only available for non-EU nationals from countries that do not have a pension agreement with Germany.

If you are eligible, you can request the lump sum payment after a waiting period of at least 24 months from the date you left Germany. This payment may be subject to tax in Germany, and you should consult a tax advisor to ensure compliance with local regulations.

 

We know that navigating Germany’s pension transfer process can be a complex task for expats, especially when dealing with different countries, regulations and pension schemes. However, understanding the essentials and reaching out to pension experts can ensure that your retirement savings stay intact and accessible. Feel free to contact us if you need further assistance. We now have a live chat feature available on every page! If you have any questions, just click to start a conversation, and our team will be happy to assist you shortly.

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