– What monthly pension the law protects the self-employed from foreclosure -.
Since 2007, the legislator has for the first time allowed the self-employed to build up assets of up to 238,000 euros with insurance companies, protected from seizure, for old-age provision. However, the full payment of 20,000 euros, which is deductible for tax purposes as special expenses, is by no means protected against seizure at any time, depending on age. Until now, this protection was only applied to the area of private old-age provision through § 851c of the German Code of Civil Procedure (ZPO).
The pension is safe – recently also for GmbH managing directors
As a result of a new decision by the Federal Court of Justice (BGH, ruling of 22.08.2012, ref. no. VII ZB 2/11), attachment protection has also been extended to occupational pension schemes. The prerequisite is that the beneficiary has been designated by name as the insured person by the employer in the contract with the insurer. A further prerequisite is that there is no lump-sum option in this contract and the future insurance benefit has been effectively pledged. What is new after the decision of the BGH is that the protection of § 851c ZPO does not require that the beneficiary is also the policyholder – it is sufficient to be a pledgee.
Is the garnishment-protected pension safely below the statutory basic security pension?
If one assumes that the future pensioner saves the protected 238,000 euros already including interest income in full and retires at the age of 65, this results in a monthly pension of approx. 900 euros. However, this optimistic figure is comparing apples and oranges, because there are decades between paying in and receiving a pension, and in the meantime inflation is steadily eating away at purchasing power. With only 2% inflation, a monthly pension of EUR 900 paid in 25 years for a further 30 years of life expectancy only corresponds to a current purchasing power of around EUR 400.
Is the previously planned supplementary pension for the self-employed sufficient as basic security?
Already about one in three of the approximately 4.3 million self-employed is a compulsory member of professional pension schemes. For the others, who have not been compulsorily insured so far, it is planned that they should provide for their old-age pension with up to 250 euros per month.
These self-employed persons should only have to save 10 percent of up to approx. EUR 2,500, i.e. EUR 250 per month. This results in a saved capital of 120,000 EUR over 40 years of working life. The government is dreaming that this could finance a pension at basic security level. Adjusted for inflation, however, including interest and including dynamisation of the 250 EUR monthly savings rate, this would ultimately amount to a maximum of only around 300 EUR per month according to today’s purchasing power value. In contrast, around EUR 625 per month, i.e. 21 percent of the monthly savings rate, would be required for basic security. Even at 21%, however, everyone below the maximum assessment threshold of EUR 2,500 would still remain below the level of basic security – and more than one million self-employed earn less than EUR 1,500 per month. You would have to (force) the self-employed to save at least 21% and not just 10% for this if you want to come close to achieving the goal of keeping them just above the level of needing assistance. But then you would have to get by on just under EUR 6 a day for food.
The fairy tale of demographic change: savings rate by income distribution
Anyone who saves a third of their income in 40 years of working life can thus roughly maintain their average net income level in 20 years of retirement, adjusted for purchasing power. This means that this goal cannot be achieved with the usual pension insurance contributions of around 20%, capped by a contribution assessment ceiling. You can get closer to the target by adding the average savings rate of about 11 percent. However, larger parts of the population, for example the 25% or so of those working in the low-wage sector, can no longer save anything at all. It is therefore to be feared that the lowering of the statutory pension, as well as the decoupling of wage development from productivity progress and from the so-called export miracle, will also lead to old-age poverty on a much larger scale than politicians have so far considered. Of course, this has nothing whatsoever to do with demography, because pensioners – just like children, the unemployed, the disabled and politicians – have always been co-financed by sharing in wage increases and productivity progress. As long as the real gross national product does not decline even more than this in the event of a population decline, it can be redistributed in such a way that no one has to cut back, no matter how much the proportion of pensioners increases. Only the decoupling of wages from increases in productivity, and thus a de facto real reduction in pension contributions, made Germany the export world champion, a low-wage country and with the prospect of mass poverty in old age – with a de facto future standard pension at the level of social assistance for many of those affected.
by Dr. Johannes Fiala
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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