With company pension plans the employee contributions are typically 3% to 15% of monthly gross salary. The company usually matches the employee contribution with a similar amount.
Employees pay into their company pension schemes on top of their obligatory state pension contributions. See German state pensions.
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German company pensions and the international employee
If you are non-German, and your company in Munich offers you a company pension, be sure to understand what you might be getting into before you sign up.
First thing to ask yourself is how long you plan to stay in Munich, or indeed Germany. If you are not here for your entire working life, will you be able to transfer the pension to another company. If moving abroad, but with the same company, will you still be able to transfer your pension? Often the answer to this is "no". There simply aren't many systems in place for the international transfer of company pension schemes. So, be sure to ask your HR manager - or whoever - about the options for a later transfer. If they don't know, or are unable to give a clear answer, you should be very wary.
Some companies do offer the option to transfer. But often these come with the restriction that you must have worked for that company for a certain number of years. For example, Merck Pharmaceuticals have a company pension scheme. But in order to transfer you must first have worked with them for at least 5 years. If you work with them for a shorter period, and then switch companies, your pension contributions are lost.
Contributions lost and forgotten
It is not uncommon these days for employees to switch between companies, and indeed countries, every few years. Frequently these employees accumulate "pockets" of company pension schemes all over the world. Care should be taken that these contributions do not get lost. What happens if you die? You won't care about your lost contributions yourself, but your family might. Do they know how to claim back these contributions.
Cancelling a company pension policy
Be aware that by cancelling a pension scheme early, and claiming back the lump sum, will only get you something like 25% of the total value. So cancelling is something you want to avoid. Best to make the right decisions from the start.
Managed funds and their growth rates
Most company pension schemes work with what is known as a "managed fund". Your montly contributions are placed into a fund which is then invested for you in various stocks and shares. During a good year this will generate 9% growth on your investment. During a bad year, however, you may not grow anything at all, or, indeed, you may loose out! The idea is that over usual life of the scheme, i.e. 20 or 25 years, then the average growth will be positive and you will end up with savings you can live off. Be aware, however, that 9% (a typical company pension contribution) will most likely not be enough for you to maintain the same standard of living in retirement as you are used to at the moment. A more realistic figure would be 20% to 25%. Usually employees are not willing to pay this much, even though they should.
Trusting the company pension manager
Another thing to be careful of with company pensions is, how do you know that your fund manager is doing a good job? Most people don't accept an employment position on the basis of the pension benefits. Rather, they accept for other reasons, and then take the pension package that happens to come with it. Before accepting the company pension, be sure to understand how it works, who is responsible, and what the risks are. It may be better to reject the company pension and take a private one instead. This way you have more control over the risk, plus there are no problems taking the pension with you when you leave the company or move to a different country. See: Private pensions in Germany
Firms offering company pensions in Munich
German firms which offer employees a company pension plan:
- Siemens - info here, anyone? What is the usual %age contribution?
- BMW - details about the pension scheme? Anyone?
- ...and more`?
International firms in Munich, and their company pension schemes:
- Intel
- Microsoft
- Cisco
- ...any more?
- ...see also the list of International companies in Munich
Further Reading
See also:
- Pensions in Germany
- First Financial Direct - professional advice about all pension-related matters, English-speaking.
- Strategic Financial Solutions - Offering independent financial advice