Advice for private pensions

Hello,
Can anyone give me, a British Teacher of EFL, living in Hannover, advice about getting a private pension plan set up: something I could pay from here in Euros and then transfer to England if I go back , for example with one of the multinational companies? Please no hard sell, and doenst have to be real financial advice - just does anyone know anyone who offers advice in the Hannover region, maybe even in English?

And do any freelancers out there actually try and pay 19% (without an employer) of their wages for a state pension system that has no future anyway?

Many thanks

Richard

Richard, welcome to Germany. I`m no financial advisor, but tried looking at some stuff like this last year when I arrived.

Unfortunately, life as an expat (and this is not a German issue, it is a working outside of the UK issue...) gets pretty complicated from a pension perspective.

Private pensions are not transferrable between countries which means you cannot have a private pension in Germany that can transfer back with you to the UK. In Germany, you pay your state contributions, no opt-out possible (except in one or two incredibly small exceptions - if it applied to you then you would already know about it). If you want to make private pension contributions on top of that - thats your choice. However, that would stay in Germany forever

if you want to make pension contributions in the UK from here (not sure if technically possible, but am sure there must be some way of doing it) would be to pay into a stakeholder pension in the UK.

Hope this helps

What is meant by private pensions "not transferrable"? I assume you can continue to pay into it regardless of where you live. Although if you have a pension from a German or other Euro-based provider and move back to the UK, then, assuming you want to continue to maintain the policy, you would have the additional costs of currency conversion in paying the monthly premiums. But the pension will surely be paid to you wherever happen to be living when you retire.

Well I was originally in the BfA state pension scheme, then became a freelancer for some years. After a year of paying even more ridiculous amounts to the BfA as a frelancer (like 1000 DM a month, it was a fixed rate for selfemployed), I got out of the scheme and started two private pensions - both with german institutions. Im now an employee again, and have my two private schemes, which I still maintain, plus I am back in the BfA state one again, half and half employer/employee contribs.

But agreed, the state one does not come cheap. And its an open question as to what we will finally get out of it. But I think that pretty well applies to all pension setups for that matter, whether private or state. Its a gamble.

I was told many moons ago by the British consulate in Delhi that you could continue to pay NI contributions (class whatever) even though not resident in the UK. This might not be the case now but I don't see why it shouldn't be.

I thought the thing about private pension schemes was that your contributions had tax benefits although you paid tax on the money you received as a pension. If this is the case surely you can just freeze the scheme when you move country and then pay tax on your pension in the country you are in?

I did hear that in the case of the so called "Riester Rente" (or should that be better called "Reste-Rente"), for which you get favourable tax relief, if you then move out of Germany at the time of pension maturity ie age 65 or whatever, then you will be liable to repay the tax relief you received on the premiums.

Surely goes against the EU ideals of free movement of people, is this is true?

Pensions are like the dark ages in Europe.

NI contributions et al are state pensions - that is not what richard asked about. Your state contributions for your time in Germany are valid for the UK state system.

PRIVATE PENSIONS - the whole point of a private pension is that you get tax relief on your contributions - ie it is not taxed. THis cannot happen if (for example) you are a German taxpayer (like all of us) and want to pay into a UK private pension scheme. Vice versa. You will not get UK tax relief for paying into a German private pension.

All of which makes private pension provision a huge issue for people who work in a number of different countries throughout their career (unless they do it all with a big firm that ensures they continue to accrue pension entitlement form the firm in the UK)

Free movement of people? EU? So that will be why Germany, France and virtually every other EU country will not open the door to workers from the 10 new states...

Not being cynical about the EU, but there are somethings its good at, some things it aint good at. One of the things it aint good at is putting at risk the status quo of protected workers in Deutschland etc to the evil threat of hardworking slavs.

Thanks for your advice everyone.

I found a loophole and am now the proud owner of a stakeholder pension with a well known pension firm. It is wonderful - best thing I ever did. I am actually quite look forward to paying into it. Its so generous with tax relief that I am now definitely becoming a UK tax payer once again, from January. God, what was I ever thinking of when I tried to set up a company here. Its paradise in the UK, I now realise. And then, when they give me an E101, I can wave that in the faces of the authorities here.

I am paying the German state contributions I owe WHICH I WILL NEVER SEE AGAIN! But what the hell, at least I can moan !

Seriously, to anyone out their self employed - reregister in Britain , set up a company in Britain or ANYTHING to avoid paying tax here. The tax is easy - its when you have to pay your insurance - for the unemployed, the old. for your future unemployment (? would I stay here!??) and the rest`s pensions and health that things get tricky! They will catch you, dont be fooled by their nice smiles at the tax office - they are phoning the Rentner Versicherung people as you close the door! Its 19.5 % of your GROSS income, by the way.

I was reading about how a few years back the government discovered a loophole regarding pensions dating back to 1913 in regards to English teachers, its seems they managed to avoid paying the pension thingy, once that was found out many got huge back tax bills and many left the country to avoid paying it.

Having said that I've been told once your are free lance status you can opt out of the Government pension and its 19,5% payments, problem is you wouldn't receive a state pension.

Also from what I've read as a freelancer your allowed many more deductions so besides making much more money you pay less taxes (including payroll).

the reason why pensions cost so much is they are generous, meet a fellow Canadian who after living here for 9 years was entitled to 560€ a month pension or about 10.000 cdn per year which is what a single person would receive after 40 years of working.

I have a friend who is a free lancer English teacher, what he pays for state pension.

Well here where I am none of that is correct. As an English teacher I am told I cannot opt out, I pay twice as much as an employee for health insurance, pension, unemployment ect... than an employee. And you think its great I can claim back my expenses? You can do that as a freelancer in any country. And you did not mention VAT. In Germany I have to charge and collect VAT after making 17,500. And we did not get into the chambers of commerce...well we wont go there. Maybe you are right and Im wrong. The worst thing here is how complicated it all is - you have to pay so many people to give you advice, and it often ends up being wrong. In England you can set up as self employed on the phone, and they are even friendly! I honestly think the German authorities do not like self employed status, as a rule.

No I dont think they like self-employed either. They dont like any individual initiative, risk-taking or striking out against established mainstream. Thats an anglo-saxon, island nation and also american new-world approach. Its too much of a threat to their preferred regulated controlled ways of doing things.

Ideally they would have everyone working either as a beamte with the government or else in a large (ideally geman owned "traditionskonzern" - none of this dangerous globalisation) company with a betriebsrat all their life in the one job and belonging to IG Metal or one of the other unions. Gleichschaltung.

I would have to agree with you on that point. Germans love things orderly and regulated etc. Best point of view that I heard regarding Europe vs America is to look at today's Fortune 500 firms Walmart McDonald's Dell etc, 30 years ago nobody heard of them, today they are behemoths. Look at any large German firm (Daimler Siemens etc) 30 years ago they were big firms. Europeans don't grow companies.

Regarding VAT my friend I mentioned above got nailed on that on his last IT freelance job, guy told him he had to charge VAT, and that he would get it back, what he failed to mention is that VAT is to be charged on top no as part of the price. David in essence reduced his hourly rate by 16%.

Is it not correct that the VAT is flow through, in other words any VAT you pay out (on business stuff) is deducted on what you collect?

Incidentally on payroll taxes, for self employed in Canada it is the same you pay both the employee and employer portion. Secondly if you are in the construction business and you hire sub trades and Revenue Canada determines that they are indeed employees you have to pay the employer portion of those expenses in spite of the fact the sub trade will have paid it already. As well the Revenue Canada is strict on who is self employed and who is an employee, as self employed you have more room for deductions (and thusly pay less in income tax).

Yes its true that VAT is "flow through", or to use the official terms, you deduct your output tax from your input tax. Or is it the other way round... Anyway, I know what I mean even if no one else does.

As regards taxation and other advice. I too have been down the path of receiving advice from accountants here that has turned out to be false. And the annoying thing is, its you who is liable, not them.

Concerning businesses in Europe, there are a small number of european IT companies who have made it big eg SAP. The german Linux company SuSe based in Nürnberg - now owned by Novell. But they are the exception. They`re much more concerned about the dangers of Heuschrecken than encouraging new enterprises.

Nokia look quite big

Airbus also...

Of the top5 (worldwide) most profitable companies, 2 of the 5 are European companies and the other 3 US.
Of the top5 (worldwide) companies who are the biggest money losers, 4 are US and 1 Japanese.
(according to Forbes magazine).