Private Pension Germany

Welcome to our page explaining the private pension in Germany. In Germany, almost everyone pays compulsorily into the public pension system. Even though this is a very large amount, it will most likely not be enough to live a comfortable life in retirement. This is not only what we say, but also what the Deutsche Rentenversicherung says. So if you want to put aside extra money for your retirement, a private pension in Germany can make a lot of sense.

Why is the private pension in Germany useful for you? That is exactly what we are here for. Our comprehensive guide takes you through all the important aspects of the German private pension system, including the accumulation phase, payout options, and taxes. Whether you are coming to Germany or have been living in Germany for some time, our site is designed to help you make informed decisions about your pension provision.

What exactly is the private pension in Germany? The German private pension level 3 is by far the most flexible way to save money for your later retirement. Here it is up to you whether you choose between a lifelong monthly pension, a one-off lump-sum payment, or a mixture of both at the start of your pension. The payment of the private pension in Germany is also possible abroad.

The private pension in Germany offers you the opportunity to combine your ETF investment and your retirement provision. This means that you can also invest in ETFs. The advantage here is the clear tax benefits compared to your normal investment account. You do not have to pay any capital gains tax on the sale of ETFs during the entire savings phase. This means tax-free capital growth. In addition, there are significant tax savings in the payout phase. The amount depends on the type of payout (e.g. lump-sum payment or monthly pension).

Should you be more on the conservative investment side, the private pension in Germany also offers you the option of a guarantee. This means that a percentage of your saved capital must be guaranteed in the pension. The percentage can vary in 10% steps. It is important to understand that a guarantee provides you with a guaranteed annuity, regardless of market and capital fluctuations, but this also means that investment potential is lost. This is because a guarantee means that the money is invested with less risk and only a portion is invested in ETFs.

Private pensions in Germany can be used for more than just old-age provision. It can also be used as loan collateral when buying a property. This applies both to an investment property and to a home of one’s own. As most banks accept pension level 3 as collateral, it is a lot more efficient to save and invest your money inside a pension instead of giving it to the bank.

In Summary, private pensions in Germany may surprise you with how cool pensions with all their benefits can really be. But, since nothing in this world is perfect, there is no universal best pension for everyone. That’s why Level 3 private pensions also have some disadvantages. If you don’t like the disadvantages, other Level 1 German pension (e.g. statutory pension as well as Rürup pension) or Level 2 (e.g. Riester pension or company pension) may be better suited to your personal financial situation. As with any pension decision, it is important for you to carefully consider your options and consult with a qualified professional before making a decision on an additional pension.