If the lecturer for civil law and insurance law at the
Dual University of Baden-Württemberg, lawyer Dr. Johannes Fiala (53, photo – Dr. Fiala) from Munich, invites people to seminars where they learn how to secure their retirement provisions and assets from seizures, he usually expects specialist lawyer colleagues who advise entrepreneurs.
“But almost no one comes from them,” Dr. Fiala describes an astonishing phenomenon to financial news service GoMoPa.net. “Instead, I have seminars full of greedy insolvency practitioners sitting across from me who want to know how to get debtors’ money.”
And here legal expert Dr. Fiala has indeed explosive information to offer. “Many Insurance companies send their sales force to entrepreneurs with a big sales lie about the basic pension or Rürup pension.
The insurances claim that the tax-subsidised Rürup pension (at the moment you can deduct 14,800 euros per person and year from your taxes as special expenses if you pay in 20,000 euros – the deductible sum increases annually by 2 per cent of the payments, up to 20,000 euros by 2025) is protected against seizure in the savings phase until the start of the pension and cannot be terminated. Both are wrong. The Rürup pension is attachable, it can also be cancelled.”
In practice, the Rürup pension (basic pension) is then also coupled with a supplementary occupational disability insurance, which in itself could not be deducted from tax, but as part of the Rürup pension contract up to the maximum amounts mentioned. “But it is precisely this insurance design model that makes the Rürup pension particularly vulnerable to creditors, insolvency administrators and tax offices and largely nullifies the alleged attachment protection,” Dr. Fiala warns entrepreneurs.
Straight ones gladly sold Rürupverträge with maximally tax-permitted inclusion of an occupational disability pension are not seizing-protected, because the BU pensions then far higher opposite the insured age pension contradict the requirements to a limited seizing-protected age precaution after paragraph 851c code of civil procedure (ZPO), because these do not permit a substantially higher BU pension than the later age pension.
GoMoPa.net: “Do you know of any insurance company that truthfully educates its distributors and customers about this risk?”
Dr. Fiala: “No, not a single one. At most a few brokers who have noticed the contradiction between the statements from the insurers’ internal departments on the actual legal situation and the corresponding court rulings, namely that section 851c of the German Code of Civil Procedure (ZPO) only allows such small contributions to be protected against seizure that these just about later result in an old-age pension of a maximum of around 1,000 euros. Anything saved beyond that can basically be garnished at any time.”
In an exclusive interview with GoMoPa.net, legal expert Dr. Fiala, up to which sums the Rürup pension in the year is actually seizure-proof, when tax authorities and insolvency administrator or Hartz-IV office can strike, and how one can bring as entrepreneurs or freelancers his money before seizures really in security.
The Rürup overpayment trap
A 29-year-old is allowed to deduct up to 14,800 euros from his taxes in 2012, but only 2,000 euros of that amount are fully protected against seizure as a deposit, and only if the pension meets four conditions: 1. for life from 60 or in the event of occupational disability, 2. without assignment or pledge to third parties, 3. as capital only in the event of death to spouses and children, and 4. is otherwise only payable as an annuity in the contract. In addition, a total of only 238,000 euros may be saved. The details follow here.
GoMoPa.net: How much capital is with Rürup in the savings phase before seizure? protected? So when does an overpayment begin that could then be garnished?
Dr. Fiala (Photo – Dr. Fiala): “As a rule of thumb, one can say that a basic pension is protected against seizure up to a later pension of around 1,000 euros. Everything that is paid in for this purpose in the savings phase is only protected within the narrow limits of section 851c ZPO.
But in order to protect a penny from garnishment in the first place, four conditions stipulated by the 1st paragraph of section 851c of the Code of Civil Procedure must actually be in the contract, which is not the norm.
The first condition is that the pension is paid for life and only from the age of 60 or in the event of occupational disability.
The second condition is that it may not be pledged or assigned by the saver.
The third condition concerns the right of subscription in the event of death. Only the biometric risk to be insured, i.e. only spouses and children are beneficiaries.
Fourth, it must be an annuity and not a lump sum payment, except for death to survivors.
Only now does it make sense to talk about garnishment-free deposit amounts.
The Rürup pension is primarily sold as a tax-shifting model. In 2005, 60 percent (12,000 euros) of the maximum subsidy amount of 20,000 euros per year and person could be deducted from tax as special expenses during the savings phase. Every year two percent are added, at the moment we are at 74 percent (14,800 Euro) of 20,000 Euro, next year at 76 percent (15,200 Euro) and in 2025 then at 100 percent of 20,000 Euro.
The income is not taxed until retirement age, when the Rürup pension is paid out. However, there are time scales which penalise those who retire earlier. For example, if I start saving at age 53 and retire at age 61, I will have to pay tax on 80 percent of the benefits from retirement income.
All statutory pensions, including Rürup pensions, were taxed at 50 percent if payments began in 2005. The taxable pension portion initially increases by 2 percent annually in accordance with the Retirement Income Act. Initially, therefore, the taxable pension component was 50 percent in 2005, rising by 2 percent a year to 80 percent in 2020. Thereafter, the taxable portion will increase by 1 percent per year beginning in 2021 until it reaches 100 percent in 2040.
But the tax-supported sums have nothing to do with garnishment protection. Garnishment-free savings amounts are far below the tax subsidy amounts.
Paragraph 851c of the German Code of Civil Procedure (ZPO) on garnishment protection for old-age pensions is decisive here. This paragraph gives concrete figures in the 2nd paragraph. First of all it concerns the sum, which everyone may save at all once in its life seizing-free. This is an actuarial reserve (surrender value) of a maximum of 238,000 euros. This is the average amount needed at the start of retirement at the age of 60 for a lifelong pension of perhaps up to around 1,000 euros. The legislature has allowed this sum to be protected by garnishment so that the self-employed person is not on the state’s pocket as a welfare case in old age.”
GoMoPa.net: If there is an overpayment in a garnishment case, does only the overpaid portion go?
lost or the entire capital?
Dr. Fiala: “Only the overpaid portion, and it’s staggered. Up to a surrender value 238,000 at the time of insolvency, the insolvency administrator may not be allowed to seize anything. The insurance customer may pay the protected graduated amounts of § 815c ZPO (for example, from the 18th to the 29th year of life annually 2,000 euros), but not overpay – thus, in the event of insolvency, far less than 238,000 euros are usually protected against seizure.
For example, if a 65-year-old has accumulated more than 238,000 euros, creditors may be staggered by attachment and, accordingly, an insolvency administrator. strike. Up to three times the garnishment allowance, 70 percent of the Overpayment to the insolvency estate or by way of attachment to the creditor, thereafter 100 per cent of the overpayment. With a surrender value of 714,000 euros, 70 percent of the 476,000 euros paid in excess, i.e. 333,200 euros, may be seized. With a surrender value of 714,000 euros or more, everything saved in excess of this sum is 100 percent gone.
If the tax subsidy of currently 14,800 euros per year (i.e. an annual payment of 20,000 euros into the Rürup pension) were fully utilised, one would probably have already exceeded the seizure allowance of up to 238,000 euros of coverage capital in 12 years of one’s working life.
The second limitation bar: Younger people are only allowed to pay in 2,000 euros per year, older people only 9,000 euros without garnishment.
Dr. Fiala continues: “But this garnishment-protected cover capital of 238,000 euros is not the only yardstick in the event of insolvency. There is a second bar that limits the garnishment-free amounts yet again. Depending on how old I am, I am only allowed to save a certain amount per year without garnishment.
Section 851c of the German Code of Civil Procedure (ZPO) stipulates that an 18- to 29-year-old accumulate free of garnishment. A 30 to 39 year old may pay in 4,000 euros per year, a 40 to 47 year old 4,500 euros, a 48 to 53 year old 6,000 euros, a 54 to 59 year old 8,000 euros and a 60 to 65 year old 9,000 euros without garnishment. For example, as a 60-year-old, you can’t just put 200,000 euros into a Rürup pension in one fell swoop to protect it from creditors later on, even if the 200,000 euros would fall short of the absolute seizure exemption sum of 238,000 euros.
Two conditions must therefore be met for exemption from seizure: firstly, that the surrender value does not exceed 238,000 euros, and secondly, that you remain within the annual savings limits, which start at 2,000 euros and end at 9,000 euros, depending on your age. Thereby additional payments for the past are allowed ? Advance payments, however, do not.”
The occupational disability insurance trap
GoMoPa.net: What about the disability insurance trap? If I pay 200 euros a month into Rürup and couple the contract to an occupational disability insurance policy and pay another 100 euros a month here, in order to also include the occupational disability insurance policy in the special expenses (up to 20,000 euros a year) for tax depreciation, will I be punished with this model on the other hand with the fact that the entire capital (300 euros a month) is now no longer protected against seizure, because the occupational disability pension is usually higher than the expected old-age pension from Rürup? Is it therefore in any case inadvisable to combine Rürup with BU from the attachment point of view?
Dr. Fiala: “That’s a smart question. The first danger I see with tying is this. As a rule, the basic pension insurance (Rürup) can be made non-contributory at any time. For example, if you become unemployed, you can tell the insurance company, I can’t deliver the agreed 20,000 euros this year.
In the case of a normal contract, the premium waiver also reduces the benefit from the occupational disability insurance. This means that if I am doing badly financially, I also lose the necessary protection for the very worst case scenario, that I can no longer practise my profession at all. The normal coupling of Rürup and BU is a typical design error. In this case, a separation of the contracts would have the advantage of not possibly losing the occupational disability cover partially or completely.
And whether for protection against seizure the coupling of Rürup with a BU makes sense, is more a question of what is less bad: plague or cholera? The additional premiums for the occupational disability insurance drive the Rürup contributions more quickly above the annual seizure exemption limits. And once you are seized, you usually can no longer continue to pay the Rürup contributions. Premium waivers and a drastic reduction in coverage follow, including for BU.”
GoMoPa.net: You spoke of a drafting error in a standard contract. Is there a way to take the tax advantage of the Rürup for the BU and still not put the amount of the once agreed BU pension at risk?
Dr. Fiala: “A high EU pension is often only realistic if Rürup and BU are separated and thus without the special Rürup tax advantage. In the event of premium exemption or attachment of the Rürup contract, if the permissible annual premiums have been exceeded, the coupled occupational disability cover is reduced.
One could repair the drafting error by making a drafting transfer to someone other than the person concerned, for example to the wife or daughter or son. She or he could then continue to pay the contributions.
It is also possible to change the BU tariff. And that’s into a plan where I pay the premium for the term insurance right up front. This is a matter of negotiation. However, if I am the policyholder myself, the insolvency administrator could cancel or a creditor can seize it.
If you are 40 years old and want an occupational disability pension of 1,500 euros, you will have to calculate an annual premium of around 900 to 1,000 euros. It would be feasible to use the woman as Policyholder to be used. She is now betting against the insurance company over your head for the BU. The money is usually gone, as with any term insurance, whether they get the BU annuity or not. But in the event of occupational disability, you would have secured the payment of 1,500 euros BU pension, as long as only she and not the wife become insolvent.
If you remain the policyholder of the BU and couple the BU with the Rürup in order to save taxes, the BU pension in the amount of 1,500 Euros will destroy your garnishment protection according to paragraph 851c ZPO. You will inevitably have to make it so eventually, which is not common in most occupational disability plans, that you cover the occupational disability pension at roughly the same level as the retirement pension. This means a life-long occupational disability pension of perhaps up to 800 euros, which at this level becomes a retirement pension seamlessly (without interruption). The BU may not end at age 60 and the old-age pension may not begin until age 62.
There are 3 to 4 providers on the market , which can offer a lifelong BU as a basic pension . Unfortunately, when advice is given by credit institutions, it seems to be the rule that calculations are made without taking income tax into account, and the BU pension is planned to be less than what is needed anyway.
For those who want to secure a high and probably adequate occupational disability pension in order to close the income gap until retirement, the coupling with Rürup is not recommended. But even if a pension of 800 euros would be enough for him, he would risk even this BU protection in bad times of non-contribution. Unless The policyholder of the BU insurance is the wife or daughter.”
GoMoPa.net: Can I get such solutions off the shelf from an insurance broker?
Dr. Fiala: “As a rule, one has to take into account several areas of law in such arrangements, for example tax law, insurance law and insolvency law. In addition, a type of asset protection in the provision for old age and occupational disability will require an overall view, because, for example, the wife or a child must be able to pay the premiums for the occupational disability insurance until the end.
In individual cases, this can also be installed as a legal tax savings model, which in the end may even yield more after taxes than any Rürup contract. Such things are then figuratively speaking tailor-made suits. I don’t know of any insurer that has its own qualified creative department for cases like this.”
GoMoPa.net: What does a typical case look like in practice?
Dr. Fiala: “The Federal Court of Justice (BGH) had to decide (judgment of 15 July 2010, file number IX ZR 132/09) on a case in which a private pension insurance policy with a lump-sum option was to be withdrawn. First of all, the insurance company sued had to hand over all the assets saved by the customer for retirement provision to the insolvency administrator. Part of the premiums had been paid for occupational disability insurance. Here, the BGH clarified that the already ongoing occupational disability pension is also conditionally attachable.
If the occupational disability pension is high, creditors and insolvency administrators can collect part or all of the occupational disability pension in individual cases according to equity considerations. Whether and how much BU pension remains to the former self-employed person is then decided by the competent court. If the occupational disability pension is concluded at too high a level, it may well be It may happen that the intermediary and/or the insurer are liable for subsequent losses, as there may be a legal obligation to provide information or advice in this respect, as recently decided by the OLG Karlsruhe (judgment of 15 September 2011, file number 12 U 56/11) in a similar case.”
GoMoPa.net: Can the Rürup pension also be attached in the payout phase?
Dr. Fiala: “The paragraph 851c ZPO protects the rather small contributions in relation to the tax write-off, however, only in the deposit phase until something comes out. In the remaining payout phase, the garnishment table applies. It is tied up until mid-2013 for now. Accordingly, a single person has 1,029.99 euros per month free. A married person with a maintenance obligation towards the wife 1,419.99 euros.
These allowances can be increased on application if, for example, you have special additional expenses due to an illness. Maintenance obligations towards children also increase the protection against seizure. In principle, it is possible to have the garnishment protection increased by court order, as far as this avoids current social welfare benefits.
All sources of income are added together. For example, if you receive a reduced earning capacity pension from the Deutsche Rentenversicherung Bund or a Rürup pension or a BU pension, or if you have transferred a property to children and the children pay you an annuity of 1,000 euros. And, of course, interest and dividends.”
GoMoPa.net: Let’s get back to the accumulation phase. How can an overpayment of the Rürup pension be seized at all, if the Rürup may not be terminated according to insurers at all? The insurers claim that the contractual exclusion of realization also prohibits the creditor from realizing the saved capital by termination. Therefore, the capital of the Rürup pension is insolvency-proof before the start of the pension.
Dr. Fiala: “The legislator has not expressly ruled out termination, otherwise the whole paragraph 851c ZPO would be pointless, which limits the seizure protection in the savings phase to a minimum. The assumption of non-terminability is completely wrong, as the Federal Court of Justice (BGH) stated on 1 December 2011 (file number: IX ZR 79/11). The legislature did not want to introduce this and, constitutionally, may not introduce it because of the protection of the creditor’s property.
Incidentally, § 851c ZPO only came into force on 31 March 2007. Previously, the insolvency administrator could cancel almost any private life insurance policy of self-employed persons and take it to the estate. It did not matter whether a lump-sum payout …for which a pension was provided.”
The Rürup contract can be terminated for a variety of reasons.
The classic in this respect is probably the judgement of the Federal Court of Justice of 4 April 1951 (file number II ZR 32/50 in NJW 1951, 714 ff.). In this case, the Federal Court of Justice affirmed an extraordinary termination without notice for special cause based solely on the unreasonableness of the continuation of an insurance contract or the policyholder’s distress.
Example: If the financial house with which one has taken out a retirement pension (Rürup) is doing badly, the customer of a bank or insurance company cannot be expected to stay with the financial house. He may then give extraordinary notice of termination.
Another example would be a hardship. This would be the case if legal aid had to be applied for. Here the courts are sometimes merciless and require the utilization of the overpaid contribution to the Rürup pension according to paragraph 851c ZPO, otherwise they deny legal aid.
Also the Hartz IV offices have no legal basis to leave the Rürup contract alone. Currently there is an internal guideline in the Federal Employment Agency that one should pay ALG II (Hartz IV) without being interested in Rürup. This can change at any time in practice.
All it would take is for an MP to nix a question to the federal government about whether it’s true that the head of the Federal Labor Agency issued such a directive without a legal basis.
If the state would have to pay Hartz IV or other social benefits, if necessary legal aid, it can demand the prior consumption of the seizable Rürup capital by extraordinary termination, as expressly stated in the explanatory memorandum to the law on seizure-protected old-age provision. As stated there, an extraordinary right of termination cannot be excluded in special circumstances such as the denial of Hartz IV benefits because of the Rürup capital, even in the case of a contractual ordinary prohibition of termination.
By the way, the same also applies to Riester contracts, here nothing is protected with regard to overpayments, i.e. who pays in more than the tax-subsidised 2,100 euros per year.
On 31 March 2010, the Federal Ministry of Finance (BMF) clarified by e-mail for all tax authorities in its letter on tax incentives for private pension provision and occupational pensions (reference IV C 3 – S 2222/09/10041 , document 2010/0256374): “The attachment of the … retirement assets does not preclude a contractual prohibition on assignment and transfer.”
Accordingly, the Federal Court of Justice (BGH) had already ruled on 25 August 2004 (reference IX a ZB 271/03) that even a provision in the articles of association of a pension scheme on non-transferability does not preclude seizure.
The Rürup lie of the insurers is justified with the fact that contractually a The exclusion of exploitation would have been agreed and the transferability would have been excluded. But such contractual exclusions do not save from seizure, because constitutional creditor protection (the state may only protect the social minimum from the creditor in accordance with the constitution) has priority, as the BMF has now once again emphasised. The BGH has repeatedly ruled that claims for which a contractual prohibition of assignment has been agreed are also attachable.
The tax office probably also doesn’t like to watch the self-employed (freelancers and tradesmen) set aside a generous pension and owe their taxes, for example.”
GoMoPa.net: But what is the use of an extraordinary termination without notice of a Rürup contract because of a hardship, if there is no surrender value at all, as the insurers continue to claim?
Dr. Fiala: “It is also not true that there is no surrender value at all with the Rürup pension, which the insurers claim in the alternative. Rather, it is always calculated from the accumulated actuarial reserve. It is only not to be paid out in the event of ordinary termination. However, the surrender value must actually be paid out in the event of withdrawal or rescission, as well as in the event of extraordinary termination in accordance with § 314 BGB. (for example, because the employment agency does not provide benefits under ALG II or Harz IV due to the crediting of the saved assets) and also in accordance with § 851c ZPO in the case of attachment of a Rürup capital that is too high and thus (partially) not protected against attachment.”
GoMoPa.net: What can I do if I have regular life insurance?
Dr. Fiala: “You can declare a waiver of disposal to your insurer, and then agree this with the insurer. This then serves to obtain a Seizure and insolvency protection pursuant to §§ 851c ZPO, 36 para. 1 InsO, 168 para. 3 VVG.
Of course, you can also consider whether this contract is properly designed in the event of a default, for example, whether you would not be better off transferring the contract to your spouse?
It is also important that the vast majority of Rürup or basic pension contracts will not fully meet all the requirements of § 851c ZPO according to the insurance conditions – the so-called waiver of disposal is a necessary, just not a sufficient condition for the garnishment protection.”
GoMoPa.net: What do you recommend to every self-employed person who wants to protect their capital cover 100 percent from seizures during the deposit phase?
Dr. Fiala: “Almost every self-employed person, that is about 10 percent of the gainfully employed, is free to pay into the statutory German pension insurance scheme on a voluntary basis. Anything deposited there in the deposit phase is subject to garnishment in the deposit phase. At present, these are contributions of 1,097 euros per month (maximum contribution) or 13,164 euros per year.
A particular charm of this can be that in certain cases you also acquire a legal entitlement to a reduced earning capacity pension, and there is the option of voluntary additional payments for certain periods of past years. From the point of view of an investor, one would speak of sensible risk diversification if one at least also built up a statutory pension.
The capital is not lost, and contrary to all criticism, with an average life expectancy you will foreseeably get a positive return after more than 20 years. Because of the generational contract, this is also referred to as the pay-as-you-go system. This contrasts with the capital cover method, which, for example, offers the prospect of a negative return in the case of numerous pension schemes or pension chambers. Several pension funds have already reduced entitlements and benefits, or are about to do so. There have already been reports in the press of cuts of 30 percent or even over 50 percent in recent years. Such institutions usually inform their members only after the fact that one has invested, for example, in Greek bonds with a capital cut.
Voluntary statutory pension insurance has been around for a long time. The paragraph 851c ZPO for a private basic pension (Rürup) came in only a few years ago. By the way, this paragraph does not protect the occupational pension scheme of the self-employed ? in this area, too, total loss in the event of the company’s insolvency tends to be the rule in practice.
My recommendation is: do not take out a small basic pension, i.e. a Rürup pension, above the limits of Section 851c of the German Code of Civil Procedure (ZPO) and pay into the German pension insurance scheme voluntarily, and as a freelancer into a pension scheme, if possible, only if the statutes, in addition to the prohibition of transfer, also expressly stipulate protection against seizure during the payment phase.
In the case of pension funds or pension chambers, it is possible to make voluntary additional contributions on a regular basis. Often, it’s a smart plan to not put all your eggs in one basket. In the case of funded pension plans, it is crucial that the investment management is competent and reputable enough. This is likely to be the case for very few financial houses, and may change at any time.
If you also have assets that should not be seized or should not be paid out as a compulsory portion, insurance policies and foundations in Germany and abroad are an option. However, one should not invest 10 million euros in one bank and in one country, but should also diversify.
No matter what you do as an independent, the key is to do all things in good times. Anything else could be punishable. Thwarting foreclosure is such an offense.”
GoMoPa.net: “Dr. Fiala, thank you for your comments.”
Dr. Johannes Fiala
by courtesy of
www.gomopa.net (published on 28.05.2012)
Our office in Munich
You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.
About the author
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.
»More about Dr. Johannes Fiala
On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.
Arrange your personal appointment with us.
You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.
The first telephone call about your request is free of charge.