Germany set the foundations for its modern Social Security system in 1889, with German retirement insurance having been a form of ‘pay as you go’ ever since. Sine 2015, around 85% of the work force is currently enrolled in the Public German retirement insurance Scheme, also known as the gesetzliche Rentenversicherung GRV. Those who are self employed are mostly self-insured, but are still allowed to participate in the GRV. Civil Servants have their own pension scheme.
There are three pillars involved to support the German retirement system. Firstly, there is the government led German retirement insurance System, followed by Private Company Plans and, finally, Private Individual Retirement Investments.
The Public German Retirement Insurance System
This pillar has been mostly dominant, also covering survivor and disability benefits. Participation is mandatory for employees, with each individual’s amount due assessed on annual earnings. The employer will deduct premiums alongside the employer paying half and the employee paying half.
As of 2015, the premium is 18.7% of the gross monthly salary and wage. This will be assessed on a monthly basis for incomes up to a maximum of €62,400 in the east and €72,600 in the west. The retirement age is soon to be raised to 67 years of age from 65.
Referred to as ‘bAV betriebliche Altersvorsorge’, Company Plans have traditionally been designed to supplement German retirement insurance. Although company plans are not compulsory, they do cover nearly 60% of the working population with this amount expected to expand. Company plan pensions usually start at 65, however this is likely to change in the near future (perhaps up to 67).
Individual Retirement Investments
This pillar hasn’t really been overly significant, but lately has gathered a fair amount of attention due to supplementing Public German retirement insurance. These ‘personal plans’ cover the Riester and Rürup plans, but aren’t limited to these only. Participants will find they can obtain certain tax advantages with accompanying benefits from subside sent by the Government for these plans. Benefits vary from plan to plan with some offering different payment methods, portability opportunities, pay out schemes and tax liabilities. Certain plans are better for individuals depending on their particular differing situations.
Any expatriates living within Germany can take part in any of these pillars. It could be possible to pay premiums to, while gaining benefits from, private pension plans – even if you were to leave Germany. Benefits coming from company plans can usually be received outwith Germany, although premiums are not always refunded.
Should an Expatriate qualify for a pension under the Public German retirement insurance scheme then it can be paid directly to them even if they choose to live outwith Germany. Regulations and laws can vary between countries in regards to collecting pensions from abroad; we suggest that you check to ensure you will receive your full pension if you move to a different country.