Retirement provision – what you should pay attention to when designing it

by Johannes Fiala, lawyer
For years, age researchers have been preaching that there are too few working people to pay the pensions of the older generation. In the past, there were two or more working people whose contributions financed the pensioners. In the future, one working person should finance one pensioner and more. The influx has been limited, so that sufficient pension contributions by foreign workers in Germany are not to be expected. Already today, every fourth German citizen is over 60 years old, and the trend is rising. What to do ? Many pensioners are annoyed that, according to statistical life expectancy, they do not even get paid out as a pension what they have paid in during their working life. The rate of return on pension contributions is clearly negative, especially when you factor in employer contributions and inflation. The fear of needing social assistance themselves one day is growing. In the past, schoolchildren and students were credited with up to 13 years of training to increase their pensions. The number of years was gradually shortened ? in the future it will only be 3 years. This does not seem unfair in the case of students, as an academic earns about twice as much over a lifetime compared to a non-academic. When it comes to old-age provision, one generally speaks of the three-and-a-half pillar model: the pillar of state pension, the (half pillar) Riester pension, private provision (e.g. life insurance) and occupational pension provision (bAV). The Riester pension has hardly caught on ? those who spend their retirement abroad do not get paid out. This ‘Malorca clause’ of the Riester pension, which is contrary to EU law, will probably be dropped: How can politicians actually want to prohibit Riester pensioners from enjoying the fruits of their own labour and savings in other European countries? The new EU law will force deferred taxation of occupational pensions as well: The forthcoming reform of pension taxation  is already under discussion. Those who pay into a company pension scheme today and have this pension paid out in Spain generally do not pay any taxes. But a look abroad is also worthwhile in other respects. In Switzerland, for example, over 50% of pension income is paid not by the state but by occupational pensions. In Germany, this share is only 5%. First of all, practice shows that private risk and financial planning makes sense even for smaller and medium incomes.

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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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