Pension Planning & Pension Schemes in Germany

The one form of insurance that we all want to use at some point, and almost certainly will, is our pension schemes.

Insurance in Germany - MW Expat - Pensions and Savings

General Information

In Germany there is a statutory pension scheme in place (Gesetzliche Rentenversicherung ‘GRV’) and with a few exceptions (in the main the self-employed), anybody who earns a living in Germany, has to pay into it. The contributions are charged at a rate of 18,6% of our salary; if you are employed your employer will pay half. 

The population in Germany is getting ever older with the baby boom generation after the war reaching retirement age. This means that there are fewer people paying into the system but an increasing number of pensioners. 

This demographic development has led to a downward spiral in pension levels. In the year 2000 pension levels were at 52.9% of our last income. In the year 2020 they will lie at 46% and at 43% in the year 2030. The Government has pledged that it will not fall under 43%, but that is still a while away and only time will tell if they can uphold this pledge. 

The Government has recognised the need for people to arrange private provisions if old age poverty is to be avoided. For this reason they have created three private schemes that they subsidise. There are also private solutions offered by banks and insurance companies.

Please find below an overview of some of the options available to you – these are, however, very important and complicated decisions and we seriously advise discussing this in more detail during a personal consultation.

State Subsidised Pension Schemes

Riester Rente

The Riester Rente is a government backed scheme where you receive yearly bonuses for for yourself, your partner and your children. You have to be part of the state pension scheme to be eligible.

Basis Rente

The Basis Rente is available to both the employed and the self-employed. Contributions into the Basis Rente can be offset against tax making this a very effective way to build up a guaranteed pension.

Betriebliche Altersvorsorge

The Betriebliche Altersvorsorge (BAV) is an occupational pension scheme which not only saves taxes, but also reduces social security contributions. This scheme is only relevant for employees.

Private Savings Solutions

The ‘Private Rente’ is the most popular form of pension savings in Germany due the possibility of investing in funds and benefitting from long-term compounded growth as well as providing the flexilbility to access the capital at any given time should it be needed.

The ‘Private Rente’ contributions are paid out of net income but there are tax benefits when they are drawn upon if certain criteria are met.

There are providers that offer a guaranteed positive investment return if desired.

MW Expat - Pension Savings

Should you be interested in more detailed information regarding your pension solution options, please do not hesitate to contact us at any time for a free and unconditional appointment with a consultant based near you.