German statutory pension insurance and private foreign pension insurance for self-employed persons

– Why there are hardly any recommendable domestic products left for insurance intermediaries –

The group of self-employed consists of about 1.2 million freelancers and about 3.0 million tradesmen. The freelancers are predominantly
Compulsory members of one of the more than 90 pension funds or pension chambers. There, however, funded savings are proving to be the most
of pensions in recent years as less and less worthwhile, with losses of up to more than 52% compared with pensions promised in the past.
The reasons for this are not so much the often faulty advice given by financial intermediaries and liability suits, or a blatant overtaxing of
risk management rather than the pressure of capital market developments with low interest rates and the trend in life expectancy on
Income and services to be provided.


In addition, there is the unshakeable belief that, with low interest rates at around 1% for more than a decade, financial bets can be made without risk.
sustainably generate a multiple increase in the value of assets for retirement provision: as soon as these dreams are caught up with reality,
further cuts in benefits are to be expected.


The mass of self-employed will have to deal with impending old-age poverty, if not living out of containers or visiting the food bank,
…but it does mean a considerable reduction in the standard of living to which we are accustomed. The notifications of the pension funds about the allegedly achieved pension rights are likely to be
many times based on the principle of hope, freely after Karl Valentin: “Hopefully it won’t be as bad as it already is”.


Misconception about capital cover

One then hears “but the pensions in the pension scheme are funded!” – when asked, there is then the idea that all the money for the
pensions to be paid out is already on the account of the pension fund. Hardly anyone has realized that only a fraction of the funding
is already available for the pensions to be paid out. Rather, one expects decades of interest rates of 4% and more on these funds, as well as the
contributions still to be paid in, so that they can then be used with the earnings yet to be earned in the calculated amount for the pension payments already promised.
will do. Capital-covered in this sense is also the obligation to pay EUR 108,000 the next day if you own EUR 3,000 and have to pay EUR 1,000 due to
Questioning the crystal ball assumes that the right number will come up in the evening if you put the money on 13 in Baden Baden. In short: Any capital cover
is not sufficient if the assumptions on future development made for its calculation decades into the future do not materialise.


Voluntary insurance in the German pension insurance (DRV)

The DRV points out that self-employed persons have the option of voluntary insurance at almost any time. The contributions currently lead to
Annual pension increases of 5.2 % of the paid-in premium, not including the dynamics of the next decades. Provided that
there is no statutory obligation to insure with the DRV, e.g. due to a main or secondary employment subject to compulsory insurance or a
Compulsory insurance on application. An informal notification to the DRV is sufficient – by 31 March of the year with the option also for the complete previous year.
to pay contributions in arrears. The amount can be freely chosen between the monthly minimum and maximum contribution – for 2013 therefore between
85,05 € p.m. and 1096,20 €. To a large extent, the contributions are deductible as special expenses, namely as a so-called basic pension – in 2013 already %..


If you only have a 450 euro job in addition to your self-employment, you only need to exempt yourself (on application) from compulsory insurance with flat-rate pension insurance.
to be exempted in order to make the way for voluntary insurance with the DRV possible. Depending on the amount of (further) income as a self-employed person
(so-called supplementary income limits), an early partial pension (1/3, 1/2 or 2/3) can be applied for. As long as a full pension is not drawn, the voluntary
Insurance possible. The DRV also allows voluntary advance payment for the entire current year.


Advantages of statutory voluntary insurance

In favour of this provision is the fact that self-employed persons are not affected by calculation errors in sample calculations about the amount of the expected surpluses of private
Annuities can be deceived. The pensions of the DRV acquired from contributions have never decreased, but by dynamics – adjustment of the pension value -.
increased. In recent years, intermediaries of private pension insurances have often been equipped with incorrectly calculating software, for example by taking as a basis
excessive capital market interest rates. In the case of pension schemes, it also happened that, for example, outdated mortality tables and unrealistically high interest rates were used in the calculations.


Private pension insurance from Switzerland for male self-employed persons

Since 21.12.2012, only so-called uni-sex tariffs may be offered in Germany via insurance agents and brokers. After the
According to the ruling of the European Court of Justice, women and men may only be calculated on the basis of the same life expectancy. These insurance rates
are much more expensive or the pensions have become much lower, especially for men. The German Federal Financial Supervisory Authority (BaFin)
already pointed out that the German Insurance Contract Act, the Calculation Ordinance and the Insurance Supervision Act also apply to offers of
of foreign insurers for Germany must be observed.


One way out, however, are the bi-sex insurance offers from Switzerland in particular, which are up to more than 10% cheaper for male insured persons.
However, these may not be sold to German customers by domestic or foreign insurance agents or by domestic or foreign insurance brokers or agents.
offered – the customer must instead contact the Swiss insurer himself in order to take out a so-called correspondence insurance policy there.
If the policy of a foreign insurer is initiated through an intermediary, German law regularly applies – and thus Uni-Sex. For intermediaries
this means then, like with some retail shop written: “Unfortunately we must remain outside”.


Advantages of pension insurance from Switzerland

Financial houses, including insurance companies, can become insolvent with a probability of up to more than 1% p.a. From the EU comes the proposal to
increase the capital adequacy of insurance companies (Solvency II). In Switzerland this has already been implemented for years – in Europe it has been suspended for years.
The now even more cautious corporate policy in Switzerland can be expected to ensure a higher degree of certainty that the performance promises made by the
insurers than in Germany.


However, German self-employed persons would have to deal with the insurance offers from abroad in detail, because different insurance conditions apply there in some cases.
technical regulations and practices, so that the review and explanation by an actuarial expert dealing with Swiss life insurance
expert is usually unavoidable. The purchase of a pension insurance in Switzerland will rarely be successful through a pen friendship.
Rather, such insurance policies are usually easily advised by insurance advisors or lawyers and with the help of tax advisors as a team on both sides of the border.
Typically, these are one-off investments made on the occasion of a settlement of a company pension scheme, or on termination of employment, but also after
an inheritance or the expiry of a life insurance policy, as well as for retirement provision that is often bankruptcy-proof in any amount.


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


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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

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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