No secure supply

Why Rürup pensions are not protected against insolvency / Neither protected against seizure nor suitable for old-age provision


The Rürup pension is a typical tax-saving model. The seller’s trick is often to highlight the tax advantages at the beginning of the contract or in the savings phase, but to completely ignore the later risks of loss and tax burdens in the payout phase or at the end of the contract. The basic pension is often neither protected against seizure nor suitable for secure retirement, as is typical for other tax savings models.


Gifted retirement benefits?

Agents often recommend the Rürup pension because up to 50 percent of the contribution is tax-deductible and the occupational disability pension (BU pension) is co-insurable. The argumentation is then, for example, “If you pay 50 percent tax, you get your retirement provision for free”. In this case, however, the occupational disability pension is so high that no pension that does not fall due immediately afterwards is insured. The old-age pension is only a fraction of the BU pension. Furthermore, a further problem arises later if – for cost reasons – the occupational disability pension ends before the start of the old-age pension. In both cases, the requirements of § 851c ZPO, which are necessary for this garnishment protection, are missing.

Up to more than 40% Rürup pensions with or without full attachment protection

Since the tax assertion of the BU pension contributions is an important argument, but the requirements of the attachment protection are too seldom observed, up to more than 25 percent of the current contracts may not meet the requirements of the § 851c ZPO. A further approx. 15 percent could be affected, insofar as the maximum limit of contributions according to § 851c ZPO for protection against attachment for the basic pension with partially tax-deductible annual contributions of EUR 20,000 or, since 2015, EUR 22,172 per annum (double for married couples) is likely to be exceeded not infrequently.


Seizure protection as an interest trap

It is almost worse when the capital cannot be seized, but only the later pension. Because if today only the later payment can be seized, the interest on the unpaid debts continues to accrue. It will then cost the policyholder (UN) considerable effort to nevertheless terminate the contract which cannot be terminated. The possibly high capital in the basic pension remains unattainable until old age and the creditors, who do not want to wait until the debtor has perhaps even died and the basic pension thus becomes completely worthless, seize all other attainable assets.

If the UN dies, the insurer gains a mortality gain – the remaining assets with the insurer are not included in the estate. One of several possible solutions to get rid of the basic pension contract would be to revoke or contradict it if no or insufficient information was provided. This opens the door to rescission, even if the insurer (BoD) is reluctant and waits to see whether the UN is serious and takes legal action. However, without obtaining an actuarial expert opinion, the BoD will hardly pay what the UN would be entitled to if the transaction were to be reversed with all the benefits derived by the BoD.

Increasing bankruptcy situation in old age

Debt collection companies see a bundle of causes for over-indebtedness in old age, such as medical costs, failed self-employment, falling pensions, rising taxes and social security on retirement income, and the expansion of the low-wage sector. Scientists believe that already in 15 years up to more than 40 percent of pensioners will be able to receive a basic security pension as a subsistence minimum. You cannot yet buy anything from the attachment protection of the basic pension during the active period, but it may be attached along with everything else. And in the pension, it is then your turn to receive the basic pension, through enforcement in the payout phase – in full, if the basic pension has not fulfilled all the requirements of § 851 c ZPO. In Switzerland today, more and more pensioners are already paying their taxes until the end of their lives because they need the money to live. This is also becoming an increasing problem here, as the Rürup pension will also soon be fully taxable.

Taxes must also be paid on the pledged pensions

The attachment of the full amount of basic pensions does not exempt them from having to pay tax on them. The future pensioner can then be introduced to the model of Diogenes – the Lord who lived in a typical Greek barrel (without a bottom): in order to harden himself spiritually, he trained not to have wishes fulfilled by begging stone statues for gifts.

Design alternatives?

The OECD is currently warning of major risks for pension funds and insurance companies. If the capital market interest rate remains permanently low, perhaps not even covering the administrative costs, investors will ask themselves about alternatives. If investors feel that there is no other alternative for them, the predominantly tax-free private pension, built up as assets with the insurer from income already taxed by the UN, would be an option. After all, it is easier to cope with tax payments in active life than in old age, when you need every cent to live: The arrangement without full tax burden and possibly full health insurance contributions as a pensioner will not be possible with either a company pension scheme or a Rürup pension.


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


by courtesy of (published in “Die Tabak Zeitung”, No. 25, page 8)

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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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