German Retirement and Pension

The German Retirement and Pension System is a pay as you go system where fees are deducted from ones monthly income. This falls under the category Rentenversicherung (retirement insurance) and is reduced from your salary by your employer. Proof of your contribution can be seen on your payslip. Employees are usually not notified of this deduction. Non German residents working in Germany are also liable to make this contribution into their retirement fund as qualification is based on the payment of German taxes.  Those on a short term contract in Germany, who are sent overseas by their company may be exempt from paying these fees in the case that their contract does not exceed five years.

The basis of the German retirement and pension system is a three pillar system. The first pillar refers to the gesetzliche Rentenversicherung which is an obligatory deduction of salaries where a percentage is paid into the funds. The second pillar covers, voluntary pension insurances related to occupation. The third pillar deals with private insurances taken out by the individual.

How does the pension system relate to expatriates living in Germany.

Not being German doesn’t exempt one from participating in the German pension system. If you are working in Germany, paying taxes, and staying for a long period of time, you too will have the opportunity to benefit from the pension system. This doesn’t commit you to staying in Germany for your retirement. Payment into both the public and private systems can be cashed out to those who have spent the required amount of time in Germany, but have chosen to retire in another country. It is important to note that while company benefits may be paid out to expatriates that have left Germany, premiums aren’t as secure, and may not be refunded. Check if the laws for pension are in favour of your native country when it comes to receiving your German public retirement benefits. Knowing this information is necessary as receiving German pension may affect pensions that you would have otherwise received in your own country. Each country has its own rules and regulations when it comes to pension and thus it is essential that you know them and do thorough research in order to determine what you are entitled to.

Provided you are of retirement age and have contributed to the pension system during your residency in Germany, having stayed less than five years in Germany, there is the possibility that you may be able to receive your pension in the form of a lump sum rather than having the benefits run on a monthly schedule.

When can you receive your retirement funds?

The typical age of retirement is 65. However, there are circumstances where an earlier or later retirement are possible. Those desiring to work past the typical age of retirement may opt to receive their payment at a later date. Those opting for an early retirement may be able to access their benefits during this time. 


Saskia Petz

Tanja Traut

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