The German pension system is based on three pillars: the statutory compulsory pension, the company pension scheme and the private pension scheme. German citizens can receive their statutory pension when they reach retirement age. If you have contributed to the social security system for 45 years, you can also take early retirement from the age of 63. People who stop working because of their age are called retirees. Many worry that they won`t have enough money in retirement. In fact, poverty among retirees is a growing problem in Germany, especially for those who haven`t earned much during their working years. This makes it all the more important to address pensions at an early stage and before reaching retirement age. Here we explain how the statutory pension system works in Germany and what other pension options are available. In addition to the regular old-age pension, there are other types such as the old-age pension for long-term insured persons, the old-age pension for long-term insured persons in particular or the old-age pension for severely disabled persons. These types of pensions have different minimum ages and contribution years. In addition, in these cases, it is also possible to retire earlier, but you will receive a lower pension. Further information on these types of pensions can be found on the website of the German pension insurance – more detailed information is available under deutsche-rentenverischerung.de.
Note: Please note that for each country where you are entitled to a pension, you are also subject to that country`s retirement age and regulations. “It`s a question of distribution; Who bears the costs of demographic change? Raising the retirement age puts the workforce under great pressure,” Geyer says. “People with low life expectancies and those with health problems will suffer more; A significant part of the population dies before reaching retirement age. Citizens of Australia, Japan, Israel, Canada, New Zealand and South Korea can enter Germany visa-free for up to 90 days and apply for a German stay while living in the country. However, if you are coming from another country, you must apply for a retirement visa before entering Germany. You can start this process at the German embassy in your home country. Germany would not be alone with such a measure. The OECD projects that the average retirement age for the average person in permanent employment will rise to 66.1 years for men and 65.5 years for women. If you work in Germany, your employer automatically pays part of your gross salary to pension insurance. In addition, your employer makes a separate contribution to pension insurance for you, and the state also provides tax subsidies.
The resulting funds will flow to those who are currently retired. This means that if you become retired later, your pension will be paid by the younger generation. This arrangement is known as a pay-as-you-go system. There are several ways to earn more during retirement. In addition to the statutory pension, there is the so-called company pension and the Riester or Rürup pension. Of course, you can also opt for a private pension plan. It`s a bit complicated. If you were born before 1947, you can start receiving the old age pension on your 66th birthday. If you were born between 1947 and 1958, you can retire at age 65 plus one month. For each year, add a month. If you were born in 1948, it`s 65 plus two months and so on. For those of us born after 1967, the retirement age in Germany starts at 67.
To be entitled to this old-age pension, you must have worked in Germany for at least five years. Geyer suggests that civil servants and the self-employed, who currently contribute to separate pension funds, could also be included in the general state pension system. If you notice any errors in your pension information or pension notice, you can contact one of the German pension insurance advice centres at any time. For example, non-contributory periods to which you are entitled may be mistakenly ignored. It`s best to make sure everything is correct in your retirement records before you retire. Then you have enough time to submit any missing evidence of contribution periods or non-contributory periods. Like many other countries, Germany has gradually raised the statutory retirement age in order to improve the long-term sustainability of the pension system. Since Germany introduced its first social security system in 1889, statutory pension insurance has been pay-as-you-go, i.e.
pensioners` current pensions are paid from the current premiums of non-pensioners. Currently, about 85% of employees are members of the statutory pension insurance GRV. Civil servants, who make up about 9% of the workforce, have their own pension system and the self-employed, who make up about 9% of the workforce, are largely self-insured (but are allowed to participate in the IBC). Once you reach retirement age, you can receive your German pension payments from abroad. However, it is important to keep in mind when it comes to occupational and personal pension contributions, as only reimbursement may be possible. It depends on the amount/duration of contributions made. One of the proposed solutions is to raise the retirement age to 70. Stefan Wolf, president of the Confederation of German Employers` Associations in the Metallurgical and Electrical Industries, called for this at the beginning of August.
And during the summer holidays, the proposal was quickly picked up by the national media. If you work for a company, they will likely also offer a retirement plan designed to supplement the state pension. These are not mandatory, but they are encouraged by the government through tax breaks and subsidies, so it`s worth checking if your employer offers them. Currently, many of these plans start with payments at age 65, but are likely to increase to age 67, like government pensions. The statutory pension insurance system (also known as statutory pension insurance), which also includes survivors` and disability benefits, was dominant. Participation is mandatory for employees, with each employee being valued for an amount based on annual earnings. Premiums are deducted by the employer, with the employee paying half and the employer paying half. In 2020, the bonus is 18.6% of the gross monthly salary.
This is estimated at monthly incomes of up to a maximum of €6,900 (€82,800 per year) in the west and €6,450 (€77,400 per year) in the east. Retirement now typically begins at age 65 plus nine months, but is expected to be gradually increased to age 67 by 2029. There are a number of ways to start early retirement – for example, at age 63, when someone has contributed to the plan for 45 years. Those who have contributed for at least 35 years can also retire early, but receive a slightly reduced benefit. Conversely, a person may continue to work after reaching retirement age. This will lead to an increase in benefits when the decision to retire is ultimately crazy. As in many countries, Germany runs a three-pillar German pension system with three different types of pension. Traditionally, many pensioners in Germany depended on a generous German statutory pension. However, due to the ageing of the population and a system in which pensioners who are not yet retired pay mean that pensioners plan their retirement provision differently from the German statutory pension.
The third pillar, individual retirement provision, has so far been of little importance, but has recently received a great deal of attention as a supplement to statutory pension insurance. These private schemes include (but are not limited to) the Riester and Rürup schemes. Workers and other members may receive certain tax benefits and government subsidies for these plans. Benefits and other details vary from plan to plan. There are different payment methods, payment systems, tax obligations, portability options, and other factors that differentiate these plans. Some plans may be better for different people depending on their particular situation. Individuals may apply, although a legal representative or authorized person may do so. Theoretically, you can contact any authority responsible for social security, as well as local administrative offices or municipal town halls and consulates abroad. To speed up the process, apply to the nearest pension authority.
Make sure your documentation is original and complete. Early retirement is possible in Germany if you have contributed for at least 35 years. If you opt for early retirement, the number of months you have before reaching retirement age will be deducted from your pension rights. This is the so-called access factor and leads to a reduction in your pension entitlements of around 3.6% for each missing year.