For the Self-Employed
The self-employed and freelancers, though the German economy relies heavily on their efforts and contributions, are always a bit on the hind-teat in the German system when it comes to offering tax-subsidized options for pension planning to them.
While voluntary contributions into the German public pension system can be legally possible, they are not really recommendable, except for self-employed/freelancers with very low current incomes.
This leaves the self-employed basically only with contributions to a so-called Rürup pension. There you can invest up to 23,000 EUR and some loose change per year into your very own pension plan and write the contributions off nearly in full against your income. That way you’ll save the taxes you would have otherwise had to pay on that share of your income. Actually, you only defer the tax payments, because the pension payout will be taxed later when you are in retirement… but presumably at a lower tax rate than the one you pay right now.
Investing into a Rürup pension plan can also be a requirement if you apply for a permanent residence permit (Niederlassungerlaubnis) in many German cities. The immigration offices in Berlin, for instance, require specific amounts that need to be invested until age 67 with the help of a Rürup pension plan in order to issue a permanent residence permit to a self-employed person. The good news, though, is that you just need to start (and uphold, of course) such a Rürup pension plan and do not need to back-pay months or years when applying.
Private pension plans are also an option for the self-employed. But usually they do not make much sense for anyone. Hence we do not actively recommend them.
This leaves the self-employed with investing directly into investment funds (we recommend passive investment funds like ETFs) or, if you plan on being globally mobile for many years to come, one of the few really good and transparently managed offshore pension plans (but please also read our warning about the many bad offshore pension plans being sold to expats out there). We at CR&Cie. are among the very few IFAs (independent financial advisors) who offer commission-free offshore pension plans to our clients. You’ll pay us a reasonable fee for our advice and services and escape the huge direct and often also additionally hidden commission costs that so many offshore pension plans charge. For globally mobile people, such a well-managed offshore pension plan can be a reasonable solution as a saving vehicle in order to make sure you’ll save up enough money for your retirement even though you are working in so many different jurisdictions and localities.
Even more than anyone else, the self-employed really need qualified professional advice as expats living in Germany to make the best out of their work and savings while living here. We are happy to advise you.