Retirement provision – Private reserves are rare in Germany

Retirement provision – Private reserves are rare in Germany

In Germany, pension provision consists of three pillars. Next to the public law compulsory systems (Statutory pension insurance, civil service pensions, old-age security for farmers and professional pensions), which form the standard security function, people ideally still have one company pension schemefor the company pension provisions form, as well as a private provision (Riester contracts, basic pension contracts, private pension insurance or other investments).

According to study of the Scientific Service of the Bundestag (WD), which was carried out on behalf of the left, receives a “standard pensioner” in Germany after 45 years of contributions on average 1,418.80 euros per month. In Austria a “standard pensioner” receives monthly 2,214.73 eurosas well as a 100 percent holiday and Christmas bonus.

In the long term, the statutory pension level in Germany, which is currently at 48.2 percent lies, in view of the demographic change, which means that there are fewer and fewer contributors to more and more pensioners, will very likely drop significantly. The statutory pension alone will therefore no longer suffice for an appropriate standard of living for many Germans in old age.

Private old-age provision rarely

A representative survey by among 2,043 German citizens shows that despite the low level of pensions, more than half of Germans (53%) do not work privately for the retirement provisions. Only 47 percent of men and 40 percent of women build private reserves. The survey participants named a as the main reason for the lack of private provision too little incomethat doesn’t allow them to save money.

In addition, some men (29%) and women (22%) stated that in old age they statutory pension for sufficient keep. A small proportion of women (6%) without private pension provision also stated that they rely on their partner. Some of the men (4%) without private pension plans, on the other hand, hope for an inheritance that pension gap should close. Around ten percent of the test subjects without private pension plans are planning to do so due to a lack of reserves to continue working at retirement age. These are other reasons against private pension schemes lack of trust in the offers (8%) and the assumption of not reaching retirement age (5%).

Company pension schemes and securities popular

The most popular supplement to the statutory pension in Germany is the employer-funded pension (35%) and Investing in stocks, bonds or mutual funds (34%). Because of the bad reputation State-subsidised Riester pension only in third place (29%). It is significantly more popular with women (34%) than with men (26%). Despite the low-interest phase, penalty interest and inflation, the money of many pensioners (22%) is also lying around checking accounts. Other popular retirement options are home ownership (22%), Daily and fixed-term deposit offers (20%) and ETFs (18%).

According to the actuaries at Mensch & Kuhnert GmbH, when it comes to private pension provision, it is the one that is often underestimated compound interest effect important. This becomes clear in the following example:

Monthly Savings Rate interest rate investment period Total deposits Total Interest final capital
250 euro 5% 35 105,000 euros 179,023 euros 284,023 euros
250 euro 5% 25 75,000 euros 73,877 euros 148,877 euros
250 euro 5% 15 45,000 euros 21,822 euros 66,822 euros

People who can start early with their old-age provision can do so low monthly savings rates build up a considerable financial cushion by the time they retire pension gap can often close to a large extent. Bonds, funds and ETFs are the most suitable forms of investment for this. People who want to use a giro or money market account instead to process their pensions are “burning out” in the long-lasting crisis phase of low interest rates considering the inflation your money.

Photo credits: Robert Kneschke /

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