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Pensions for Expats in Germany

Submitted: October 2013

Germany is a high-tax high-spend country. Yet, you are much better off when you earn a decent living in your working life.

The German social security system is one of the oldest in the world. It is essentially financed through social insurance rather than taxes. Entitlement therefore primarily depends on your previous contributions into the system. However, there are some social assistance programmes for low-income pensioners (generally below €800 per month). For many expatriates, Germany’s pension system may appear as quite conservative.

By European standards, and given its rapidly ageing population, Germany has moderately low pension contribution rates. As a result, German pensions tend to be so appalling that it has become necessary to save through the private system.

Although Germany has enacted tax incentives to save through regulated private pension schemes or life annuity contracts, these still have a limited extent.


Retirement and social insurance in Germany


All workers in Germany are subject to social insurance legislation, which includes old-age insurance. German social insurance is compulsory and on a pay-as-you-go basis, but it is not really redistributive.

Regarding pensions (Gesetzliche Renteversicherung), the bill is equally shared by employees and employers. However, old-age insurance does not apply to earnings in excess of €5,800 per month (€4,900 in former East Germany). Self-employed individuals need not contribute to old-age insurance either, unless their activities are treated as disguised employment.

In 2013, the contribution rates are as follows:


Rate (%)

Maximum per month (€)







Reduced rates may apply to individuals with the so-called “mini-jobs” (up to €850 per month).
In addition to old-age insurance, workers and pensioners must contribute towards long-term care insurance (Pflegeversicherung), which is assessed on earnings below €47,250. In 2013, the following rates are applicable:


Rate (%)

Maximum per month (€)




Employee (Saxony)






Employer (Saxony)






The German system somewhat expects you to have children to look after you when you retire. If you don’t have any children, you must pay an additional 0.25% towards long-term care insurance. This surcharge does not apply if:


Germany has a points-based system, whereby pension payouts are directly connected with your previous assessable earnings. As you earn money and pay into the system throughout your career, your contributions are automatically converted into points (Entgeltspunkte). These points reflect your assessable earnings relative to the German average. They must then be multiplied by a coefficient (€28.14 since 1 July 2012).

In other words, the longer you work, the more points you accrue, and the more you get.

Here is an illustrative example:


In 2012, Anna earned 120% of national average earnings (€32,446).

As a result, Anna accrued 1.2 points in 2012. These are currently worth 1.2 * 28.14 = €33.77 per month. She will be able to claim these points back upon reaching pension age.
Assuming she has worked 40 years on 120% of the national average, her pension rights would be 40 * 33.77 = €1,350.80 per month.

Pension age is currently slightly above 65. It is scheduled to gradually rise to 67 by 2029. There are rumours that the Government is considering raising it further to 69.

As a rule, you cannot draw on your pension rights unless you have contributed for at least five years.

Old-age pensions are generally taxable benefits, but only to the extent that contributions were previously deducted.


International matters

German old-age pension

You can apply for a refund of your previous old-age pension contributions if you permanently leave Germany.

Social security agreements

Germany may have entered into a social security agreement with your home country. These agreements are primarily designed to avoid discrimination and double social security coverage. They may cover employees as well as self-employed individuals.

In addition, social security agreements may “totalise” your periods of contributions or residence in Germany and in your home country. This is particularly helpful if your home country expects you to contribute for a long time (e.g. you must have contributed for 40 years to avoid a pension rebate).

International superannuation planning

Superannuation schemes are generally tax-efficient products, no matter the country in which they are opened. Thus, they are heavily regulated in order to avoid undue tax base erosion. Thus, you should check:

Your home country may have a tax treaty with Germany to avoid double taxation on your foreign pensions. As a general rule, pension payouts are only taxable in your country of residence, but there are exceptions.

Retaining your foreign pension arrangements may be a practical option if you don’t intend to stay in Germany. Nevertheless, cross-border superannuation planning is always on a case-by-case basis. It is strongly recommended to seek professional advice regarding this matter.



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