In a broader sense, private pension provision includes all voluntary savings that serve to build up assets until retirement. As the level of the statutory pension continues to fall, the financial gap to the usual income is getting bigger and bigger.
Why should I take out private pension insurance for old age?
The statutory pension alone is no longer enough to maintain your accustomed standard of living in old age. On average, it accounts for just 48% of your last gross salary.
This means that anyone who has earned the current average salary of 38,901 euros for 45 years will receive a pension of just 22,776 euros - before deducting taxes and social security contributions. And who works 45 years or more? This so-called pension level is set to fall to 43% by 2030.
So that you don't have to do without anything in retirement, you should act today and take out a private pension.
What is old-age poverty?
The term old-age poverty is often used in reports on the subject of pensions.
Old-age poverty is intended to express the fact that a person of retirement age has to struggle with financial problems due to inadequate pension provision.
The income is not sufficient to cover the standard of living and daily financial needs, i.e. all expenses.
Am I affected by poverty in old age?
Old-age poverty can affect anyone. However, people who do not reach 45 years of full-time work for various reasons are particularly at risk. This mainly includes people who have been unemployed for a long period:
Were unemployed
Have not worked due to parental leave or caring for a relative
Have worked part-time or seasonally for little money
Were restricted in their job due to illness
Moved to Germany later in life
Making private provision for your pension is an important step to ensure that you remain financially secure and independent in old age. You can't do it soon enough. You don't even need a lot of money: most insurance policies start at 50 euros a month.
What is the difference between a Basis pension and a Private pension?
If you're employed:
Basis pension | Private pension |
Tax savings while paying into the pension plan | Tax benefits while payout after retirement |
Money is locked up until retirement | Flexibility in withdrawing the money |
Works only while being located in Germany | Flexibility in location |
Only a monthly pension payout is possible | Choosing between a monthly pension and/or one-off capital |
No option for cancellation | You can cancel at any time |
If you're self-employed or a freelancer
Basis pension | Private pension |
Tax savings while paying into the pension plan | You can use a private pension to reinvest the tax returns |
You can avoid paying into the statutory pension insurance | Can also be an alternative to statutory pension insurance |
You can use Basis pension to apply for permanent residency | You can’t use it for permanent residency |
Protected against insolvency | Not protected against insolvency |
Money is locked up until retirement | Flexibility in withdrawing the money |
Works only while being located in Germany | Flexibility in location |
Only a monthly pension payout is possible | Choosing between a monthly pension and/or one-off capital |
No tax benefits after retirement, you have to pay full taxes on the pension payouts | Tax benefits while payout after retirement |
Read more about Basis pension here.