What monthly pension does the law protect from seizure for the self-employed?
Since 2007, the legislator has for the first time allowed the self-employed to build up assets of up to EUR 238,000 with insurance companies as seizure-protected old-age provision. However, the full annual contribution of EUR 20,000, which is deductible for tax purposes as special expenses, is by no means protected against garnishment at every point in time, depending on age. Until now, this protection applied only to private old-age provision by virtue of § 851c of the ZPO (German Code of Civil Procedure).
The pension is safe – recently also for GmbH managing directors
Following a recent decision of the BGH (Federal Court of Justice, ruling of 22 August 2012, ref. no. VII ZB 2/11), garnishment protection has now been extended to occupational pension schemes. The prerequisite is that the employer has designated the beneficiary by name as the insured person in the contract with the insurer. A further requirement is that the contract contains no lump-sum option and that the future insurance benefit has been effectively pledged. What is new following the BGH decision is that the protection under § 851c ZPO does not require the beneficiary also to be the policyholder – being the pledgee is sufficient.
Is the garnishment-protected pension safely above the statutory basic security pension?
Assuming that the future pensioner saves the protected EUR 238,000 in full, including accrued interest, and retires at the age of 65, this results in a monthly pension of approximately EUR 900. However, this optimistic figure compares apples and oranges, because decades pass between paying in and drawing the pension, and in the meantime inflation steadily erodes purchasing power. At an inflation rate of just 2 per cent, a monthly pension of EUR 900 paid out in 25 years’ time over a further 30 years of life expectancy corresponds to a present-day purchasing power of only around EUR 400.
Is the planned supplementary pension for the self-employed sufficient as basic security?
Already roughly one in three of the approximately 4.3 million self-employed is a compulsory member of a professional pension scheme. For the others, who have not been compulsorily insured to date, the plan is that they should provide for their old age with up to EUR 250 per month.
These self-employed persons would only have to save 10 per cent of up to approximately EUR 2,500, i.e. EUR 250 per month. Over 40 years of working life this yields accumulated capital of EUR 120,000. The government dreams that this could finance a pension at basic-security level. Adjusted for inflation, however – including interest and including dynamisation of the EUR 250 monthly savings rate – this would ultimately amount to a maximum of only around EUR 300 per month in today’s purchasing power. By contrast, around EUR 625 per month, i.e. 21 per cent of the monthly savings rate, would be required for basic security. Even at 21 per cent, however, anyone below the maximum assessment threshold of EUR 2,500 would still remain below the basic-security level – and more than one million self-employed persons earn less than EUR 1,500 per month. To come close to the goal of keeping them just above the level of needing assistance, one would have to (compel) the self-employed to save at least 21 per cent rather than only 10 per cent. But then they would have to make do with 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 over 40 years of working life can roughly maintain their average net income level, adjusted for purchasing power, across 20 years of retirement. This means the goal cannot be achieved with the usual pension insurance contributions of around 20 per cent, capped by a contribution assessment ceiling. One can get closer to the target by adding the average savings rate of about 11 per cent. However, large parts of the population – for example the roughly 25 per cent 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, together with the decoupling of wage development from productivity gains and from the so-called export miracle, will lead to old-age poverty on a far larger scale than politicians have so far assumed. 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 through a share in wage increases and productivity gains. As long as real gross national product does not decline by more than the population in the event of a demographic shrinkage, it can be redistributed such that no one need cut back, no matter how much the proportion of pensioners rises. It was solely the decoupling of wages from productivity gains – and thus a de facto real reduction in pension contributions – that made Germany the export world champion, a low-wage country, and a nation facing the prospect of mass old-age poverty, with a de facto future standard pension at the level of social assistance for many of those affected.
by Dr. Johannes Fiala
