German WAY OF LIFEPENSION PRODUCT
WITH MORE SUNNY THAN SHADY SIDES

The pension reform in 2001, which at the same time led to a deterioration of the pension, created a pension gap in the statutory pension. You should close this gap as an insured person. Especially from the social group of expatriates, who only come to Germany in middle age, the situation can become quite critical.

ADVANTAGES OF THE RIESTER PENSION:

  • welcome contributions (4% of gross and max. 2100€ p.a.)
  • Tax benefits and allowances
  • Hartz IV safe
  • highest pension with the lowest net contribution for low to middle-income earners
  • 30% capitalizable
  • Guaranteed payment of paid-in premiums (fund investments without risk of loss)

To this end, the Riester pension was introduced as a new form of private, capital-funded supplementary provision. This particular provision is voluntary - the state provides a subsidy to encourage people to take out a Riester contract. If you pay a certain amount of contributions for this form of old-age provision, you receive bonuses for this and can, under certain conditions, claim these costs as personal expenses for tax purposes. A further advantage: state-subsidised old-age provision via a Riester contract is "Hartz-IV-fest".

This form of investment is primarily unusual for employees. Its structure, which the legislator has defined through the state subsidy instruments, is aimed at people from all income brackets.

For expatriates who are married, the Riester pension is particularly interesting, as the spouse or partner also receives an allowance and support. It also has excellent tax advantages that far outweigh the disadvantages. The tax refunds are usually higher than the benefits and are a new investment, especially for top earners.

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Possibilities of old-age provision

3 - layer model of retirement provision

... IN A BRIEF

1ST LAYER: BASIC SUPPLY

The first shift is taxed entirely downstream. Contributions can be tax-deductible. Donations to the Rürup pension, can be 90% tax-deductible in 2020.

This percentage increases by 2% every year, so that from 2025 100% of contributions can be tax-deductible.

From 2025, the Rürup pension tax advantage is thus 100%.

Belong to the basic pension:

  • Statutory pension
  • Rürup pension

2. LAYER: ADDITIONAL SUPPLY

The state can subsidise products of the second layer; contributions are tax-deductible.

Also, the following bonuses apply to Riester pensions:

  • Basic allowance: 175 euros
  • Child allowance:  per year and child
    • 185 euros for children born by the end of 2007
    • 300 euros for children born from 2008

The supplementary pension scheme includes:

  • Riester pension
  • Company pension scheme

3RD LAYER: INVESTMENT PRODUCTS

Products of the third layer do not necessarily have to serve the purpose of retirement provision and are therefore more flexible.

Private pension insurance and its advantages

  • Certainty about the pension
  • mostly life-long payment
  • without health issues
  • Tax advantages possible
  • flexible retrieval options

Investment products include:

  • Private pension insurance
  • Life Insurance
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