5 things to know about retirement in Germany
Every year, thousands of pensioners move abroad to retire in another country and Germany is no exception. These are the 5 most important things to know about retirement in Germany.
1. Depending on when you were born, the retirement age is either 65 or 67
The retirement age in Germany is 65 for people born before 1947 and 67 for those born after 1964. But for anyone born between 1947 and 1964, things are a little more complicated.
Due to a law passed in 2007, people born in 1947 can still retire at 65, but for every year after that until 1958, the retirement age increases by one month. For example, those born in 1948 can retire at 65 plus one month, those born in 1949 can retire at 65 plus two months and so on.
Then for those born after 1958, the retirement age increases by two months each subsequent year until it reaches 67 for people born in 1964 and after.
This change was introduced to cope with the ever-ageing German population and to keep more people in the workforce. But some politicians don't think this is enough and have discussed increasing the retirement age to 69 by 2060.
Germans can choose to retire early, but this comes with financial consequences. For every month remaining before you turn 67, 0.3% of your total pension must be deducted.
2. You are entitled to some state pension after paying in for just 5 years
If you have been living and working in Germany and paying tax contributions to German social security for more than five years, you may be eligible to receive some state pension once you retire.
Anyone in employment is automatically covered by the state pension, as well as some groups of self-employed people. As in other countries, you pay in half and your employer pays the other. Germans can also choose to pay into a private pension if they wish to.
Every month, employees pay 19.9% of their net untaxed income into the state pension scheme, this is usually automatically deducted with the listing RV or Renteversicherung, meaning pension insurance.
3. If you've paid into a pension abroad, you can transfer it over and receive it in Germany
Foreign nationals who choose to retire in Germany can transfer their pensions over to be paid into their German accounts, regardless of whether the pension is state funded or private. how much you get taxed on it, however, depends on the social security agreement your home country has with Germany.
This also works for transferring any pension earned in Germany out to another country of residence, but the same tax rules apply.
4. Working in the public sector really pays when it comes to pensions
Working in the public sector in Germany means you don't have to pay your own pension contributions, but your salary is lowered slightly anyway to compensate.
The German language has different words for a public sector earned pension, "Pensionär", and a normal state pension, "Rente". Retired public servants are significantly better off in their old age than private sector workers, as, according to Focus, during their retirement, their yearly pension equates to 68.1% of the gross salary received in the 2 years before they retired.
Meanwhile recipients of the normal state pension get 20% less than public servants, receiving on average 48% per year of their net income two years before they retired.
5. If you've paid in for a particularly long time, you can retire at just 63
Back in 2014, under Merkel's government, a law was brought in that if you have already paid into the system for more than 45 years and were born before 1953, you are allowed to retire at just 63, four whole years before the national limit.
In order to qualify for this perk, you would need to fit into a pretty small dermographic of people who started working on their 18th birthday and have paid in every year until they hit 63.
This decision was heavily criticised given the increase in life expectancy and improved healthcare, meaning older people spend longer in retirement and put an increasing strain on pension funds.