Supplementary pension schemes in Germany

Most employees in Germany pay into a statutory State insurance pension, most self-employed/ freelancers have the option to pay into it or not.

But what are the best known pension systems for people choosing to set aside extra money for their old age?


Advantage for employees: changes from January 2019 through the Betriebsrentenstärkungsgesetz ( BRSG)

Every employee has a legal right to ask their company for a Direktversicherung, with a monthly sum being directly deducted from the gross salary. Up to 8% of the so-called Beitragsbemessungsgrenze   can be invested free of tax and free of social insurance contributions and with a reduced tax burden. That means the premiums save you money which would otherwise be taxed. NEW: from January 2019, an employer is also obliged to top up the employee´s Direktversicherung contributions by 15% and also for EXISTING employee pensions from 01.01.2022.

Advantage for Employers

Some employers offer a company pension which they pay for, which can be a Direktversicherung, to motivate employees and to reduce their own tax and social security contributions.

In both these cases, employees normally have a free choice of investment in a variety of life insurances.

Rürup Pension

Since 2005, the so-called „Rüruprente“has become a popular way to save for a pension, particularly for self-employed / freelancers and well-paid employees. The tax advantages are considerable: in 2018, for example, 86 % of the premiums can be set against tax, increasing by 2% per year and reaching 100% in 2025. Singles can contribute up to € 23,712 a year and married couples € 47,424. Rürup savings cannot be seized by the State in case of personal insolvency/ unemployment (Hartz IV ) - that'sanother reason  why it's an interesting savings model.

Riester Pension or Riester trap?

A popular State-sponsored top-up pension plan, especially for below average earners and families with children. Is it worth it? That depends ! Everybody regardless of contributions has the right to a basic pension ( Grundsicherung ), averaging € 703 a month depending on which Bundesland you live in.

It's only worth considering such a pension scheme if your expected Grundsicherung is above € 703 a month because , if you have a private Riester pension, your monthly earnings from it in retirement will be offset against the basic pension!

This is an important issue which requires professional advice – we are only too happy to help!

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