Optimisation of widow’s pensions for compulsory members of pension schemes

– Possibilities of structuring pension assets in pension chambers –

The Higher Administrative Court of Rhineland-Palatinate (OVG Rheinland-Pfalz, judgment of 26.05.2010, Case No. 6 A 10320/10.OVG) already dismissed the action of a doctor who wanted to have it established that his wife would later be entitled to a widow’s pension from the pension fund.

Pension funds conduct insurance business

The (compulsory) members pay contributions to their pension chamber, from which cover in the event of old age, death and invalidity is financed by assuming the risk. In addition to the caring cooperative insured person’s pension (insurance principle), there is regularly a survivor’s pension (dependents’ principle) without additional contribution – but of course not contribution-free. However, “subsequently married” widows and widowers are often excluded from the provision for dependants (risk limitation principle).

Pension gaps depending on the statutes of the Versorgungskammer

Widows and widowers are often not entitled to any survivor benefits at all from a pension chamber, depending on the statutes. Doctors, pharmacists, dentists, tax consultants, lawyers, auditors, architects and notaries can sometimes choose or design which pension fund they want to belong to, with correspondingly different statutes in terms of content.

Some widows have no claim at all if, for example, the marriage took place after the pension started. Also, a claim may only arise after a certain period of marriage. The freelancer also has it in his own hands, already for risk spreading voluntarily or due to insurance obligation applied for in time, to secure a future widow’s pension at the Deutsche Rentenversicherung Bund. Term life insurance with conversion of the benefit into a survivor annuity can also be useful.

Design by application for pension and divorce

It can therefore be worthwhile, for example, to postpone the start of the pension if a divorce and remarriage are pending – in addition, your own pension will increase as a result. It may also be worthwhile to postpone the start of occupational disability in some cases.

Conversely: if the widow would get nothing or little, it may be worthwhile, e.g. in the case of a serious terminal illness, to get divorced, regardless of whether before or after the start of the pension, because then a pension equalisation takes place and the “widow” can then legally get more under this than she would get as a real widow under the statutes.

Capital settlement or capital transfer

Some pension schemes also provide for the possibility of a lump-sum settlement, which can be worthwhile if the prognosis for illness is poor. Possibly even more, if before still by pension equalization is divided.

Some pension funds have joined a transfer agreement according to which the capital can be transferred when moving and changing to a new pension fund in such a way that the classification at the new VW is carried out as if one had paid the contributions there at exactly the same time as at the old VW – an often favourable solution.

If the subsequent marriage of a Thai or Filipino wife, for example, is accompanied by a conversion to Islam, the proverbial second wife abroad can also be provided for.

Legal and actuarial differences

Pension schemes have different rates of return for their members, especially if this is also applied to certain partial benefits. Of course, this has not just been true since the Republic of Austria announced in its Federal Law Gazette of July 31, 2014 that 890 million euros of Hippo Happy Halodria subordinated bonds would not be repaid. Corresponding claims of the pension chambers are thus extinguished despite the alleged state guarantee.

Even without looking at such individual investments, pension schemes can be compared, including the question of how they are calculated in the event of a switch. Depending on age and other circumstances, there are different focuses, maximum limits, imputations (amount and final age), for example, also in the case of occupational disability. In addition, there are also different calculations of entitlements – more or less funded or by apportionment. A change can therefore be worthwhile from a certain age, for example, because the contributions from then on lead to higher pensions in one pension scheme than in the other as part of a mixed calculation.

Example of an occupational disability pension: here, for example, the average contribution from access to the pension chamber can count, which is then extrapolated up to age 55, 60 or 62 depending on the pension scheme and access. So if you paid in little at the beginning and now much more, the low earlier years can have a negative effect on the average value and a change to another federal state can be worthwhile, where only the higher contributions count from the change. The change can be arranged in a targeted manner in accordance with professional law, not infrequently without a real move.

Tourism can be rewarding even at an advanced age

Most pension funds assume that they do not have to fear selection because of compulsory membership. They probably ignore the fact of a possible tourism. However, there are sometimes aggravations for accesses in higher ages, which indicates that they are too favorable here, which could be exploited (if necessary, just in time). On the other hand, this also represents an option for the strategic exit from a compulsory contribution.

The “non-contributory” widow’s pension is not financed by capital in the case of the pension scheme, but rather on a pay-as-you-go basis, so to speak. However, some pension chambers offer a higher pension if the beneficiary is not married when the pension starts. This may also be an advantage, and a move may be worthwhile.

The pension funds do not calculate widow’s pensions on an individually funded basis, but assume that a certain proportion are married at 65 and that the wife is always 6 years younger, for example.

If a widow’s pension were included in a private pension scheme, then an additional premium would have to be paid for it, depending on the age itself, and if the wife dies before then, the risk would no longer apply and the premiums for remarriage would also have to be paid again for the new risk. The pension chambers, on the other hand, do not operate on such an individually funded basis, so that there, restrictive rules in the statutes are used to counteract over-exploitation in the case of widows’ pensions at the expense of the other members of the pension scheme.

An optimization, which can bring up to 6-digit euro amounts in profit, is nevertheless – not only with the widow’s pension – often possible. As a downside also such expensive mistakes, which can often be avoided in time. Often, only an analysis of the situation and federal options with the help of an actuarial report will reveal the most financially efficient courses of action.

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

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Über den Autor

Dr. Johannes Fiala
PhD, MBA, MM

Dr. Johannes Fiala ist seit mehr als 25 Jahren als Jurist und Rechts­anwalt mit eigener Kanzlei in München tätig. Er beschäftigt sich unter anderem intensiv mit den Themen Immobilien­wirtschaft, Finanz­recht sowie Steuer- und Versicherungs­recht. Die zahl­reichen Stationen seines beruf­lichen Werde­gangs ermöglichen es ihm, für seine Mandanten ganz­heitlich beratend und im Streit­fall juristisch tätig zu werden.
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