Riester Rente vs. other pension schemes

227 posts in this topic

Hi,

 

I have a question about the various riester rent plans. Someone kindly set me up with DWS and I noticed I pay 18 Euros per year for something called "custodian fees".

 

However when I asked a friend who has a plan with Allianz they said they don't recall having to pay any yearly fee to the bank.

 

Sorry for not giving you much info to work with but I wonder if anyone has insight on why that could be the case.

 

Thanks!

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HI am new here but I have been following several threads for some time. 

Aah, I wish I’d seen this thread when I moved to Germany in 2014. Unfortunately, my employer, an International NGO was not very good in explaining the German pension system to me with result that I was under  impression that I will be getting a decent pension from German state . To be fair to my employer, I am enrolled in some scheme where I pay  some % of my  salary and they contribute with something, possibly the rate is 2% me  and 4% they or 4% me and 6% they, not sure which. . I believe its administered by something called MER  and also get their contribution to Renteversischerung with 145€/month, i believe with Volkwohl Bund.

 

I am now contemplating Riester Rente for several reasons.

My income is relatively good but my wife works part time and we are taxed commonly as 3+5

  1. Every year , I file my taxes and need to pay some 2-3k back taxes.  Needless to say, I hate that. I understand that if I invest in Riester , I will be able to deduct what I save and thus instead of paying back to the state I actually will reduce the pain will be partially paying it to myself.

  2. I am 54 today and whereas I have decent pension scheme from the 25+ years I worked in Sweden, I “lost” the last 6 years while here in Germany.

 

I have been reading both this thread and some other sources and asking around and I have several questions which I would hope the good people of Toytown could help in answering.

 

  1. I have heard that if you are part-time employee and consequently have very low income, like my wife, she works 20 hours per week as my salary can support both of us, than once you reach your retirement age and your pension is at minimum, than if you have Riester, the state will decrease your state pension with same amount you would be getting from Riester? (sorry, I know it sounds like a constipation theory)

  2.  Reading this thread I learned that if I retire in Sweden or Germany, I can claim full benefits but if I am thinking of  retiring somewhere warm, than I will only get parts of it? What if I stay 6 months in EU and six abroad?

  3. I took some “test shot” on Check24, typed “Riester rente” and went through a questionnaire. I selected one with no upfront payment, fonds instead of classic.  It seems that Check24 implies my top contribution can be €160.41 per months whereas reading this thread I thought it would be 175 (or 4% of my salary)? 

  4. The different options would give back offers where the guaranteed annual retirement payment will be between  1000 and 1150 while “possible” return between 1400 and 1700. I presume Check24 only have few of possibilities: would this be what is normally expected? This makes it between 100-140€ per month in added Riester retirement payouts …I also presume this is “gross” of future taxes?

  5. When I filled in the form on Check 24 I was automatically asked for my wife: does this mean I can only have one Riester per couple or can it sign up for myself but not also another saving plan for my wife?

  6. Final question: as we are already into 2020 for few month: can I make any extra payment to account for JAN-MAR ? Can I perhaps still make an extra payment for 2019?

 

Many thanks in advance for your feedback!

 

 

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1 hour ago, aeroplane said:

HI am new here but I have been following several threads for some time. 

Aah, I wish I’d seen this thread when I moved to Germany in 2014. Unfortunately, my employer, an International NGO was not very good in explaining the German pension system to me with result that I was under  impression that I will be getting a decent pension from German state . To be fair to my employer, I am enrolled in some scheme where I pay  some % of my  salary and they contribute with something, possibly the rate is 2% me  and 4% they or 4% me and 6% they, not sure which. . I believe its administered by something called MER  and also get their contribution to Renteversischerung with 145€/month, i believe with Volkwohl Bund.

 

 

 

I am now contemplating Riester Rente for several reasons.

 

My income is relatively good but my wife works part time and we are taxed commonly as 3+5

 

  1. Every year , I file my taxes and need to pay some 2-3k back taxes.  Needless to say, I hate that. I understand that if I invest in Riester , I will be able to deduct what I save and thus instead of paying back to the state I actually will reduce the pain will be partially paying it to myself.

     

  2. I am 54 today and whereas I have decent pension scheme from the 25+ years I worked in Sweden, I “lost” the last 6 years while here in Germany.

     

 

 

I have been reading both this thread and some other sources and asking around and I have several questions which I would hope the good people of Toytown could help in answering.

 

 

 

  1. I have heard that if you are part-time employee and consequently have very low income, like my wife, she works 20 hours per week as my salary can support both of us, than once you reach your retirement age and your pension is at minimum, than if you have Riester, the state will decrease your state pension with same amount you would be getting from Riester? (sorry, I know it sounds like a constipation theory)

     

  2.  Reading this thread I learned that if I retire in Sweden or Germany, I can claim full benefits but if I am thinking of  retiring somewhere warm, than I will only get parts of it? What if I stay 6 months in EU and six abroad?

     

  3. I took some “test shot” on Check24, typed “Riester rente” and went through a questionnaire. I selected one with no upfront payment, fonds instead of classic.  It seems that Check24 implies my top contribution can be €160.41 per months whereas reading this thread I thought it would be 175 (or 4% of my salary)? 

     

  4. The different options would give back offers where the guaranteed annual retirement payment will be between  1000 and 1150 while “possible” return between 1400 and 1700. I presume Check24 only have few of possibilities: would this be what is normally expected? This makes it between 100-140€ per month in added Riester retirement payouts …I also presume this is “gross” of future taxes?

     

  5. When I filled in the form on Check 24 I was automatically asked for my wife: does this mean I can only have one Riester per couple or can it sign up for myself but not also another saving plan for my wife?

     

  6. Final question: as we are already into 2020 for few month: can I make any extra payment to account for JAN-MAR ? Can I perhaps still make an extra payment for 2019?

 

 

 

You need professional advice from someone who will crunch all the numbers for you. Do not try to do this on your own.

 

I would recommend either @Starshollow or @john g..

 

 

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18 hours ago, engelchen said:

 

 

You need professional advice from someone who will crunch all the numbers for you. Do not try to do this on your own.

 

I would recommend either @Starshollow or @john g..

 

 

Yes, this is the plan but  I still want to get basic understanding of those things before I make any decisions, the questions I asked are not really about crunching numbers but to understand the generic characteristics of the Riester plan...

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Coming from the UK, we have a self invested pension plan system (SIPP). This allows you to hold shares directly, funds, cash and some other things. At retirement (from 55 to 57 currently), you can buy an annuity or move to drawdown. An annuity seems to be the ONLY option in Germany. Basically give your pension to an insurance company in exchange for paying you back some percentage of this each year. The percentage is not set by you, but according to average life expectancy. Drawdown by comparison allows you to draw whatever percentage you decide upon each year.

 

According to  https://www.mpg.de/13326414/lower-pension-shorter-life guys can expect to live between 19 and 15 years past retirement at age 65, depending on how well you retire.

 

Now given this statistic, which I will round up to 20 years, that's basically 5% a year for someone retiring having a good income in retirement. If I am expecting to beat the average, well add a few years, and if not, subtract some.

 

If I assume a pension pot of 100K (easy math) then 5% is 5000 Euros a year, over 20 years available with drawdown.

Now in 20 years, if I use  https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator from the UK I see I £5000 of goods in 1999 cost £8730 in 2019, an average of 2.8% per year inflation over 20 years. I will assume a similar inflation outlook for the next 20 years.

 

If I use  https://www.noelwhittaker.com.au/resources/calculators/retirement-drawdown-calculator/

And put in 2.8% indexation rate, and a 0% growth rate (assume the sum is in cash at retirement), the 100K figure allows me to pay out

3000 per year, indexed, for 24 years

4000 per year, indexed, for 19 years

5000 per year, indexed, for 16 years

 

If I use check24 to make a 15 year contribution of 555 Euros (555 x 180 payments = 100K) to a Rurup pension I get a guaranteed annuity of 3222 per year. Now the insurance company will assume some % growth rate, and average the life expectancy, some 19 years. Comparing with the 4000 per year figure, that's 80.5% of that figure, or a little under 20% profit for the insurance company.

 

Is there anything in Germany where you can do any of the following?

1. Use drawdown instead of being forced to by an annuity?

2. Put money away for a pension and deduct this in some way from you tax bill, as the income is deferred, but not get screwed in either annual charges or annuity charges?

3. Ideally have that money remain in cash. Plain old deposit account with the bank type of cash. Pay it to me when I retire, either monthly or annually for N years?

4. If not in cash, then in shares directly, but not in funds. I am happy to pick my own share portfolio.

 

In the UK too we had this old annuity system, but they finally reformed it some years back. I wonder what are the options here.

 

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