The Pension Landscape Germany


   

For the employed population in Germany the statutory pension scheme is the main source of retirement income. It is an earnings related and mainly pay-as-you-go financed system. Occupational pension provisions are also widespread, however, the coverage is intended to grow. Employers have the choice between five different vehicles. Of course voluntary private pension savings are possible such as life insurances or private equity investments.
 

Statutory Pension

Provider/
Institution:
German Statutory Pension Insurance Scheme – Deutsche Rentenversicherung (DRV)
 
  State Pension
for employees:
Compulsory insurance generally mandatory by law for  people in employment
 
  Financing: Financed on a pay-as-you-go basis, federal subsidies of 24 %.
Contribution of 18.7 % up to a monthly contribution assessment ceiling of EUR 6,050 in West-Germany and EUR 5,200 in East-Germany (2014), employers and employees are charged with half of the contribution.
 
  Old-age benefits: The minimum qualifying period for an old-age pension is 5 years.
Main retirement income for the majority of today’s retirees, earnings- related calculation, 45 years cont./average income result in approx. EUR 1,314.45. Social Assistance for people with low income

Occupational Pension

Coverage
rate:
Coverage rate in 2011: 64 % of workforce
 
  Mandatory/
voluntary:
Non-obligatory by law
Compulsory insurance for the public sector based on the collective bargaining agreement; additional voluntary insurance available.
Deferred compensation (Entgeltumwandlung) is obligatory on demand of the employee
 
  Tax incentives: Approx.15 Mio “Riester” contracts eligible for state support such as state allowances and tax-deductible special expenses (Sonderausgabenabzug).

Private Pension Savings

Products: Life insurance products,
bank saving plans,
fond investment.
 
  Tax incentives: If certification as “Riester” product.


 
 
 
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