Taxes and retirement savings in the Fatherland

Hi All,

Hope you're having a good weekend. I was trying to estimate what my total deductions for taxes etc. would potentially be, using an online calculator, and there are some things that aren't clear yet (The fact that I don't speak German doesn't help, admittedly!)

The general consensus seems to be that it's painfully easy to see your total deductions near 50%, but when I look at the income tax tables and run through an example, it seems closer to 38%, which I'm assuming is because it doesn't include these categories from the tax calculator:

Krankenversicherung:
Pflegeversicherung:
Rentenversicherung:
Arbeitslosenversich.:

So these are for retirement, unemployment and health insurance, and what else? Also, how do most large companies handle retirement savings? I spent most of my working years in the U.S., where you also have mandatory deductions for retirement ("social security")- Everyone who is around 35 or younger basically assumes that the social security system will collapse or pay virtually nothing by the time they get to retirement age, yet they don't grumble much about it since the deductions are quite small. Instead, they use a retirement savings vehicle called 401K which is not run by the government, and companies usually add a bit to what you invest. During my employment in England, the arrangement has seemed somewhat similar in that my company has a separate program called Group Personal Pension Plan with the Prudential company.

What about in Germany? If the amount they deduct for retirement is substantial, that's clearly bad news since the social security system is probably in even worse shape than America's, and it also leaves you less money to invest yourself through your company's separate program (assuming they have one)? Is there ever an option to choose to invest your retirement funds privately (through your company's program) rather than contributing to the gov't social security system?

Thanks for your advice!

Don't they offer tax breaks for starting a private pension now? Not sure how it works but I have seen something about it in the Sparkasse. Would like to know more.

In a word - sadly - No.

The govt pension deduction (which i think is 9% of gross earnings but capped at apprx €500 per month) is compulsory and there is no way out (apart from one or two very specific instances - i think German chartered accountants and perhaps lawyers are able to avoid it and instead contriute to a personal pension)

I looked at this myself when I came over here and realised how much the deduction actually is but discovered that there is no way out of it. There is one instance in which it is repayable to you though - if you leave Germany within 2 years of being in the country and go to a country outside of the EU then your retirement deductions are paid back to you as a lump sum at some point down the line.

Thanks Jonnyboy. Is it common for large companies to also offer an independent retirement program on top of that, like they do in the UK/U.S., or do they just assume that everyone's already bleeding enough with the 9% ?

However worth noting if your self employed you dont have to make gov pension contributions thank god, an international private offshore type will do nicely. Also you dont pay plegdeversicherung and can opt for a much cheaper/better international private healthcare scheme. If you move to germany make sure your freelance or your screwed!!