Commentary: When private and occupational pensions cut provision

Survivors rub their eyes when the survivors’ pension of the German Pension Insurance (DRV) is reduced to zero after three months. Marriages entered into after 2002 or those where both spouses were born after 1962 are affected by this provision.


In these cases, 40 percent of the additional net income is offset, i.e. deducted from the survivor’s pension. The insurers’ advertising of “own provision” for wives then proves to be a sure loss-making business.


Only the social assistance level is safe from cuts

Due to an allowance, only the subsistence minimum is spared, namely 755.30 euros per month in the old federal states and 696.70 euros per month in the new federal states. Only tax-exempt income (e.g. unemployment benefit II, basic income support in old age, in the event of reduced earning capacity and social assistance) and Riester pensions remain free of deductions.

This means that in the case of occupational pensions from deferred compensation, direct insurance and private pensions, the remaining “return” – only 60 percent of the net amount after taxes and social security contributions may be retained – will immediately turn negative. The question is whether it makes sense to conclude new contracts or to continue such contracts, or whether this effect can be prevented by timely termination and a one-off payment.


An opportunity to reverse direct insurance policies

Life insurers are promoting separate provision for – married – women. For brokers and insurance agents, the question of liability arises, for example, if such contracts are terminated at a loss. Likewise for employers: If necessary, this would be an opportunity to reverse direct insurance policies or deferred compensation, which would then also eliminate the burden of full GKV contributions in old age as a pensioner.

If a private pensioner wants to withdraw from his contract, he will benefit from the fact that around 85 percent of the advice given by intermediaries is not documented. This leads to a reversal of the burden of proof in liability proceedings against the intermediary. Employers do not even mention the disadvantages of survivors’ pensions, or are advised to do so by their intermediary, as this would make the sale more difficult and involve greater expense. Intermediaries are neither trained nor educated in this, so that the prospects for reversals or compensation in such cases are likely to be predominantly good.


Even financial planners rarely know the rules of the game

A more purposeful approach would be for the widow to be income poor and live on the widow’s pension. Everything you earn above the statutory tax-free amount will be partially offset later, including your own DRV pension, of course.

In the case of private pensions, one solution is for the wife to pay into an annuity for which she is a beneficiary, but for the life of your husband, and then for the annuity to end on his death. This pension is then higher than your own life annuity and ceases to apply on death. So she’s better off with that. This can be covered with a separate term life insurance policy with decreasing sums from the start of the annuity to the husband.

In the case of the husband’s private pension, no guaranteed period after death and no survivor’s pension are then agreed. Instead, a higher pension is paid, for which the wife is the beneficiary, until the death of the husband.

In the case of the wife’s own DRV pension, such offsets against the survivor’s pension can be minimised by not paying anything in addition voluntarily, by applying for a pension at a later date or by initially applying for only a partial pension, which again increases the future pension entitlement.


How the rich widow becomes income poor on paper

With the capital incomes the woman can say goodbye to interest incomes and switch instead to an investment in precious metals, how even as gold savings plan Islamkonform of iFIS Islamic Capital near Stuttgart not only for Muslims offered. Rented properties can be sold in time. The wife can then gladly waive deferred compensation – or have it settled promptly.
Any type of capital (antiques, gold, jewelry, art, or collectible rugs) that does not earn interest or current income, but does appreciate in value, is harmless.

Pension splitting leads directly to the complete elimination of the widow’s pension entitlement. So this approach is borderline, which is why you have to calculate carefully. This also requires expertise.

Changing income poverty later

Poverty according to the tax assessment means for wives, however, that they can be rich in income until the death of the husband himself, because they have to be poor only later, i.e. only as survivors. However, a million or more in jewellery, gold, diamonds, owner-occupied property, foreign currency or paintings and antiques is harmless. In the best case, income poverty can still be reshaped later, even in the case of a fiscally wealthy widow, if no earlier disposition was made.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of (published 07.08.2015)


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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala ist seit mehr als 25 Jahren als Jurist und Rechts­anwalt mit eigener Kanzlei in München tätig. Er beschäftigt sich unter anderem intensiv mit den Themen Immobilien­wirtschaft, Finanz­recht sowie Steuer- und Versicherungs­recht. Die zahl­reichen Stationen seines beruf­lichen Werde­gangs ermöglichen es ihm, für seine Mandanten ganz­heitlich beratend und im Streit­fall juristisch tätig zu werden.
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