The pension system in Germany is based on a three-layer model

  • The first layer covers some basic pensions, which include statutory pension insurance, pension schemes of the liberal professions (for lawyers, doctors, architects etc.) and the Rürup pension.
  • The second layer is primarily aimed at employees and comprises different forms of tax-subsidized pension schemes, including company pension schemes (bAV) and Riester contracts.
  • The third layer refers to unsponsored pension schemes, such as private whole-life insurances or pension insurance or offshore pension plans. In addition, fund savings plans can also be used for private provision.

 

Almost every worker/employee is covered by the first layer. On the other hand, it is up to everyone to save up in layers two and three, because it is evident that the public pension will face serious demographic problems in the next decades and may not be able to pay out sufficient pensions later in life. Therefore additional pension savings are strongly recommended.

Which pension scheme is the right one for you depends on whether you are employed or self-employed, whether you want to take advantage of government subsidies or save flexibly, and how much time you have until you reach retirement.

Different forms of flexibility (or lack thereof) are also important. And very important is the question of costs: pensions are sold around the world often still based on commission payments for the advisor, which can lead to very high costs that run counter to your wish to have an efficient savings tool for your pensions. While we can offer commission-based advice on pension plans if you prefer that, we also offer strictly fee-based advice with so-called “Netto-Pläne” for both German pension plans and offshore pension plans alike.

Therefore, custom-tailored consultation is always important here for everyone in Germany. This applies even more so to expats, some of whom already have pension insurance in other countries (public pension or 401(k), Roth IRA, DB Pension Schemes, SIPP and so on), because the average German advisor will have little to no experience with such foreign constructions and can consequently not develop a coherent strategy for an expat that includes such other pensions from outside Germany as well.

In some cases, the acquisition of a permanent residence permit in Germany also requires special pension insurance. This can be very different from city to city – but we have a good overview of the larger cities in Germany and know with what kind of pension plans you can satisfy the requirements to receive your “Niederlassungserlaubnis” (permanent residence permit). We are happy to advise you!

 

3rd layer

Open-ended funds

Closed-end funds

Private pension insurance (LV)

 

2nd layer

Company pension plans

(four important implementation channels available, most important one being the Direktversicherung bAV)

Riester

 

1st layer

Special pension systems for doctors, pharmacists, lawyers etc.

Basic pension/Rürup pension

Statutory pension insurance