Hi,
some background: Have no pension plan yet, not really sure where I will be in the next 5/10/15 years either country or job wise. Hope to be in Germany, but who knows!
I want to start a pension, but not really sure of the best place to put the money.
What's the pros and cons of the Riester Rente system vs standard funds etc? What other good options are there for pensions - especially for expats who have no idea where they will be in the years to come.
cheers
Germany's English-speaking crowd
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Riester Rente vs. other pension schemes - Germany
Pros and cons
Rieste Rente are designed for a specific market segment. Depends on your circumstances especially earning whether they are good for you.
They also carry VERY strict pay out policies that make them less appropriate for non-Germans who might one day move "home".
They also carry VERY strict pay out policies that make them less appropriate for non-Germans who might one day move "home".
I've been doing some research, and it looks as though you can create your RiesterRente using a choice gov. approved fonds, so the base increase should be ok at 6% approx.
On top of that, the gov. add every month a certain % depending on what you put in. I believe THAT is what you won't get, if you leave Germany. You'll still get the money and growth that the individual put in.
As I can't be sure where i'll be, I can't be sure if this is a good idea or not. Doesn't seem so bad - looks like a normal fund, with an added bonus??
On top of that, the gov. add every month a certain % depending on what you put in. I believe THAT is what you won't get, if you leave Germany. You'll still get the money and growth that the individual put in.
As I can't be sure where i'll be, I can't be sure if this is a good idea or not. Doesn't seem so bad - looks like a normal fund, with an added bonus??
I am considering getting a Reister Rente set up.
Can anyone share there experiences or will I be the first...
Can anyone share there experiences or will I be the first...
While RIESTER was manly invented by the German authorities in order to breach a gap opened up by a legal reduction of state pension, it does have a number of neat issues Expats should know about which make them interesting for them.
O.k., first things first:
1. you can only put a certain amount of money each year into the RIESTER penion scheme for getting the direct subsidies and tax breakes. since this pension scheme was planned to help people to put up another 3% of their state pension, this is obviously not much. Will give concrete numbers tomorrow. Riester can be a nice add-on to your overall pension plans, but not your sole pension plan (unless you prefer to sleep under the bridges come pension time)
2. Riester is only ment for employees. Self-employed only have a chance to participate, if their married partner is an employee and participating
3. Good thing: you get a direct subsidy for yourself and for every kid, money cash from the governement
4. Good thing 2. you can write of your payments against your income taxes
3+4 usually helps that you get about 30-50% subsidy on your payments and you have to look far in order to find such a profitable investment for your money
5. You also have to know: you can only cash in 30% of the funds ( money paid in plus profit/interest accrued over time) at the end of the time when pension starts. The rest or all of it has to be paid out in monthyl installment as pension. So do not mistake it for a life insurance or something like that. Which also means: you can not borrow against the money in the contract. On the other hand, funds in the Riester contract are secured against third parties in case of your personal insolvency/bankrupcy or Hartz IV.
For those who only plan to live a couple of years in Germany it is interesting as well, but there are some things you need to know and i will elaborate tomorrow since my wife just is about to cut of the power of the PC.
O.k., first things first:
1. you can only put a certain amount of money each year into the RIESTER penion scheme for getting the direct subsidies and tax breakes. since this pension scheme was planned to help people to put up another 3% of their state pension, this is obviously not much. Will give concrete numbers tomorrow. Riester can be a nice add-on to your overall pension plans, but not your sole pension plan (unless you prefer to sleep under the bridges come pension time)
2. Riester is only ment for employees. Self-employed only have a chance to participate, if their married partner is an employee and participating
3. Good thing: you get a direct subsidy for yourself and for every kid, money cash from the governement
4. Good thing 2. you can write of your payments against your income taxes
3+4 usually helps that you get about 30-50% subsidy on your payments and you have to look far in order to find such a profitable investment for your money
5. You also have to know: you can only cash in 30% of the funds ( money paid in plus profit/interest accrued over time) at the end of the time when pension starts. The rest or all of it has to be paid out in monthyl installment as pension. So do not mistake it for a life insurance or something like that. Which also means: you can not borrow against the money in the contract. On the other hand, funds in the Riester contract are secured against third parties in case of your personal insolvency/bankrupcy or Hartz IV.
For those who only plan to live a couple of years in Germany it is interesting as well, but there are some things you need to know and i will elaborate tomorrow since my wife just is about to cut of the power of the PC.
it's mainly interesting for people with kids, and you shouldn't bee too old when you enter.
I have a Riester-contract, at the time I was working at the university and I could get it directly from the State-insurance (VbL) without any additional administrative costs, it was directly deduced from my salary. I could keep the contract when I moved to a private employer and have to do the payments by my own now.
I have a Riester-contract, at the time I was working at the university and I could get it directly from the State-insurance (VbL) without any additional administrative costs, it was directly deduced from my salary. I could keep the contract when I moved to a private employer and have to do the payments by my own now.
Just get an international pension that you can take with you whichever country you move to. Martin Brown at First FD can advise on the options.
As far as I understand the rules - you *cannot* keep your Riester-Rente if you leave Germany. Either during your working life, or in retirement. That means that even Germans are warned to think carefully before taking one out, in case they later want to retire to the south of Spain.
I would advise asking for some details from your bank, they will be probably quite pleased to do this if they think you might end up starting your pension with them!
I would advise asking for some details from your bank, they will be probably quite pleased to do this if they think you might end up starting your pension with them!
I have also looked into the Riester Rente a lot and all you get to take with you if you leave are your own contributions, none of the nice bonuses which would be the point of doing it. There are much better ways to invest the same money in the meantime where you get to keep what your money's "earned"...
During a trip to my bank they took the opportunity to try to sell me this, and it does appear good if you are a salaried employee with some free money each month, especially good if you are a relatively high earner.
The questions that are still open to me, which maybe someone can answer - the main one being if I leave Germany can I get out what I paid in as a cash payment to take with me? The earlier posts in this thread sound somewhat speculative, but does anyone know for a fact. The next thing was, if I retire in Germany how much do I get? The bank said something about a monthly payment of 500 euro for as long as I live, assuming a growth of 8%, with a 'grundrente' of 200 odd. What's all this about? Alternatively I could take out 60,000 euro as a lump sum although I'd accrued a total fund of 140,000
4. Good thing 2. you can write of your payments against your income taxes
This is the best thing about it - the tax refund is directly to you in cash, not just added to your Riester account. You pay in a relatively affordable amount each month, 100-200 euro was suggested to me with the exact amount calculated to maximise the tax return for my payment, and get approx 1/3 to 1/2 back in refunded taxes. On top of this the government adds 150 odd euro to the account each year which if you retire in Germany you keep. If you leave Germany these payments are deducted but you keep the interest that was created by this money, this much I'm certain about.The questions that are still open to me, which maybe someone can answer - the main one being if I leave Germany can I get out what I paid in as a cash payment to take with me? The earlier posts in this thread sound somewhat speculative, but does anyone know for a fact. The next thing was, if I retire in Germany how much do I get? The bank said something about a monthly payment of 500 euro for as long as I live, assuming a growth of 8%, with a 'grundrente' of 200 odd. What's all this about? Alternatively I could take out 60,000 euro as a lump sum although I'd accrued a total fund of 140,000
Riester is interesting if you are a single parent, especially if you've got more than one kid. As I understand it, you will always get back what you paid in, so it's at best a kind of interest-free savings account if you're thinking of leaving Germany (altho are they ALLOWED to not give it to you at least within the EU?)
HellesAngel:
it is correct that if you leave Germany you can get all the money you personally have put into the RIESTER-account out. On top of that you can keep the profits accrued from the subsidies and tax brakes which over time can add up to 2% performance to your other investment. Will publish a WIKI about this topic soon.
Most important however, especially when you talk to insurance and bank guys about Riester is looking at the costs/fees. If you plan to leave the country in a couple of years or if you are uncertain as to how long you can stay in Germany, you must ask for a contract without "Zillmerung". What does this mean?
Most contract I know will collect all fees for the whole duration of the contract during the first 5 years, this is allowed by the law. If you are now say 40 years, the remaining contract time until pension age is 25-27 years. The computation for the costs would be monthly payment times total month times aroun 4-5%. Example: 100 EUR per month is a total investment of 30.000.- EUR over 25y. The costs/fees computed here would be 1200 EUR. This amount will be deducted from your payment into the Riesterplan in the first 5 years, i.e. you pay in 1200 EUR per year but only 960 EUR will get actually invested. this can easily consume the benefits you reap from the subsidies and tax brakes.
If you get yourself an "ungezillmerten" contract, about 4-5 % of your yearly investments will get only deducted each, i.e. only 60 EUR each year. For people who stay only limited time of years, only contracts without Zillmerung make actually sense. You will not get them offered often, though, because it spoils the commission of the insurance or bank agent, no fast money for them, sorry ;-)
One other thing you are free to decide if you leave the country is this: you can either cancel the contract and than get back your own money plus profits or interest from subsidies and tax brakes. However, if you do not need the money, you can file quite simply for deferal of the repayment until pensiontime. this means, to stay with our above example, you pay in your 100 EUR per month for 5 years, on top you receive the subsidy of 114 EUR per head plus the tax brake which can be another 200-300 EUR, depending on your personal income tax level. Now when you file for deferal, both your own money plus the money from subsidies and tax brakes continue to generate profit for you for the next 20 years. When you are 65, you tell the German authorities that you are not coming back to live in Germany at receive your rental payment there. Which means now you do have to pay back the subsidies and tax brake money, but still the same amount like 20 years before. The result is a interest-free loan from the German government for 20 years, sizable profits from the investment of the "loan" are staying with you and the money you have to pay back is due to inflation only 2/3rds in real value then. And now comes the fun part: if you decide to get rental payments monthly from this Riesterplan and not a lump-sum payment (you are entitled to 30% lump sum payment anyway), the money you owe to the governement will be deducted from the rental payments each month with an amount that must not exceed 15% of the rental payment itself, thus you extand your tax-free loan for some more month or years.
Therefore, in contrast to public opinion and what most banks and insurances say, Riester is even interesting for people who plan only to stay a couple of years in Germany, because they have a chance to make profit with the "interest-free-loan" and thus increase the profitability of your own invested money by around 2 % over time.
Unfortunately there are not many "un-gezillmerte" contracts on the market and they are not exactly agressivly sold or offered because insurance agents and banks want to have the Zillmerung in order to get high commissions when the contract is signed. Beware of that!
Cheerio
Pat
it is correct that if you leave Germany you can get all the money you personally have put into the RIESTER-account out. On top of that you can keep the profits accrued from the subsidies and tax brakes which over time can add up to 2% performance to your other investment. Will publish a WIKI about this topic soon.
Most important however, especially when you talk to insurance and bank guys about Riester is looking at the costs/fees. If you plan to leave the country in a couple of years or if you are uncertain as to how long you can stay in Germany, you must ask for a contract without "Zillmerung". What does this mean?
Most contract I know will collect all fees for the whole duration of the contract during the first 5 years, this is allowed by the law. If you are now say 40 years, the remaining contract time until pension age is 25-27 years. The computation for the costs would be monthly payment times total month times aroun 4-5%. Example: 100 EUR per month is a total investment of 30.000.- EUR over 25y. The costs/fees computed here would be 1200 EUR. This amount will be deducted from your payment into the Riesterplan in the first 5 years, i.e. you pay in 1200 EUR per year but only 960 EUR will get actually invested. this can easily consume the benefits you reap from the subsidies and tax brakes.
If you get yourself an "ungezillmerten" contract, about 4-5 % of your yearly investments will get only deducted each, i.e. only 60 EUR each year. For people who stay only limited time of years, only contracts without Zillmerung make actually sense. You will not get them offered often, though, because it spoils the commission of the insurance or bank agent, no fast money for them, sorry ;-)
One other thing you are free to decide if you leave the country is this: you can either cancel the contract and than get back your own money plus profits or interest from subsidies and tax brakes. However, if you do not need the money, you can file quite simply for deferal of the repayment until pensiontime. this means, to stay with our above example, you pay in your 100 EUR per month for 5 years, on top you receive the subsidy of 114 EUR per head plus the tax brake which can be another 200-300 EUR, depending on your personal income tax level. Now when you file for deferal, both your own money plus the money from subsidies and tax brakes continue to generate profit for you for the next 20 years. When you are 65, you tell the German authorities that you are not coming back to live in Germany at receive your rental payment there. Which means now you do have to pay back the subsidies and tax brake money, but still the same amount like 20 years before. The result is a interest-free loan from the German government for 20 years, sizable profits from the investment of the "loan" are staying with you and the money you have to pay back is due to inflation only 2/3rds in real value then. And now comes the fun part: if you decide to get rental payments monthly from this Riesterplan and not a lump-sum payment (you are entitled to 30% lump sum payment anyway), the money you owe to the governement will be deducted from the rental payments each month with an amount that must not exceed 15% of the rental payment itself, thus you extand your tax-free loan for some more month or years.
Therefore, in contrast to public opinion and what most banks and insurances say, Riester is even interesting for people who plan only to stay a couple of years in Germany, because they have a chance to make profit with the "interest-free-loan" and thus increase the profitability of your own invested money by around 2 % over time.
Unfortunately there are not many "un-gezillmerte" contracts on the market and they are not exactly agressivly sold or offered because insurance agents and banks want to have the Zillmerung in order to get high commissions when the contract is signed. Beware of that!
Cheerio
Pat
Just as an aside, I have my own personal scheme which I refer to as my "Whisky Rente"!
No, not a joke, I have a substantial personal whisky collection which is increasing nicely in value year on year and much of it out-performs many other investment areas.
But there again, should the value crash - at least I can drink my investment
No, not a joke, I have a substantial personal whisky collection which is increasing nicely in value year on year and much of it out-performs many other investment areas.
But there again, should the value crash - at least I can drink my investment
Malt-Teaser; agree that investing in Whiskey can be profitable and is certainly fun. only problem for me: while I would not invite even my best friends to simply take money out of my account, I tend to love to share my Ardbeg Uigedal or my Bruichladich with friends and there goes my money, well not down the drain but drained down for sure... ;-)
However: while I do not know much about the increase of value of selected whiskeys, i am doubtful that they can beat the 30-40 % profit one receives from a Riesterplan from subsidies and tax-brakes. And that does not even take in account the additional profits from investing the money in the Riesterplan in a Templeton or Fidelity or the likes. On the other hand, once you have filled the Riesterplan with the yearly max. investment of currently some 1.600.- EUR, there should still be time and money left for good whiskey.
Cheerio
However: while I do not know much about the increase of value of selected whiskeys, i am doubtful that they can beat the 30-40 % profit one receives from a Riesterplan from subsidies and tax-brakes. And that does not even take in account the additional profits from investing the money in the Riesterplan in a Templeton or Fidelity or the likes. On the other hand, once you have filled the Riesterplan with the yearly max. investment of currently some 1.600.- EUR, there should still be time and money left for good whiskey.
Cheerio
Starshallow - it is indeed fun collecting whisky (whiskEy tends not to be so collectible as the Scottish stuff!).
There are quite a few examples of 300% to 400% in 1-2 years, sometimes that much in just a few months. But if you really know what you are doing, a realistic average would be more like 10% per annum.
Good luck in your own specialist area!
I am not trying to advocate whisky collecting for all, but my little hobby grew out of my observation that certain examples do increase in value over time.
MT
There are quite a few examples of 300% to 400% in 1-2 years, sometimes that much in just a few months. But if you really know what you are doing, a realistic average would be more like 10% per annum.
Good luck in your own specialist area!
I am not trying to advocate whisky collecting for all, but my little hobby grew out of my observation that certain examples do increase in value over time.
MT
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