I'm confused about "Pension/Direktversicherung"

16 posts in this topic

Hello, 

 

I'm 30 years old and non-EU. I start my first job in Germany and I'm confused about the job contract in the section "Pension/Direktversicherung". It's written that "Der Arbeitgeber zahlt nach den ersten 6 Monaten der Beschäftigung monatlich bis zu 150 an Versicherungsbeiträgen in eine vom Mitarbeiter gewählte Direktversicherung ein." 

 

I'd like to know, is there any available choice for me? It's not compulsory to apply for this option right? However, does it better to apply for one since the company will pay for that?

 

I've heard that the company also has the option for employee to sign up for, but if I quite before 5 years then I won't get anything!!!

 

Could you please give me an advice whether I should apply for one or which option/company is better for me?

 

I'm planing to live here in Germany and apply for a citizenship in two years but future is uncertain I might or might not stay here until I'm retired.

 

I'm from SE Asia and I think, it's more cheaper there at that time.

 

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“Der Arbeitgeber ist grundsätzlich verpflichtet, Entgeltumwandlung im Rahmen einer Pensionskasse oder Pensionsfonds (oder Direktversicherung) anzubieten, jedoch kann er den Anbieter der betrieblichen Altersversorgung bestimmen (§ 1a BetrAVG).”

https://de.wikipedia.org/wiki/Direktversicherung

 

The purpose of a Direktversicherung is to increase the money you will receive when you retire. So you will have a mixture of state pension and private pension at your disposal. There are however lots of rules and regulations regarding tax and helath insurance contributions etc. You should really get expert advice before you sign anything, particularly if you are not sure if you will remain in Germany.  

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@Ohng - every employee has the right to transfer some of his gross salary into a private personal pension plan. That allows you to safe money otherwise "lost" to the taxman (and, if your gross salary is below certain thresholds, also in parts contributions to public pension, unemployment insurance etc) into your very own pension capital.

Your employer is also offering a quite good co-payment, which comes on top of your own contributions.

basically you can in 2017 tax-optimize your company pension paying-in as follows:

Total contribution per month:  404 EUR from your gross salary

out of which are 150 EUR paid tax-free by your employer

which leaves you with a transfer of only 254 EUR from your gross salary which probably only costs you 130-140 EUr in reduced net salary.

 

So, from that side there is little reason not to do that.

 

What is important then is to find a plan that comes with a decent rebate on the closing costs and ongoing administrative costs. Germany is still a heavily commission driven market for pension plan advice/sales. usually the costs for a "normal" off-the-shelf plan are around 4.5 % on the total amount to be invested (monthly premiums times 12 times years until pension age gives you the total amount).   A good broker can get you a plan with 50 % rebate which makes a whole lot of difference right from the beginning.

 

The money in the bAV company pension stays there until you reach pension age (unless you are leaving Germany for a country outside the EU with which Germany has not bilateral agreements before you reach 60 months payments into German public pension, because then you can get both your share of public pension paid back to you and the capital from your company pension scheme, too).  Before you reach pension age you cannot touch the money - but you can mive the plan from one employer to the next within Germany or, if the new employer does not accept any other plans than the ones he set up, you can transfer the capital from your "old" plan to the new one.

 

When you reach pension age you have the right to get the entire capital paid-out to you or just a part of the capital and get an annuity for life for all money left in the plan with a guaranteed pension factor set up today.

 

As WRoY says correctly, you should use an independent advisor to set you up with this. Several of which are advertising here on Toytown - if your employer leaves you free choice of advisor and plan, pick one from those who offer loads of free advice here on Toytown to assist you.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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2 hours ago, Starshollow said:

The money in the bAV company pension stays there until you reach pension age (unless you are leaving Germany for a country outside the EU

Hello @Starshollowand thanks for the comprehensive explanation. 

My company also offer bAV but unfortunately they have an agreement with specific brokers. What the broker told me was that I could take the money out even if I moved back into another EU country. is this information wrong?

 

Also, shall I be able to access any type of online or paperwise form to see the evolution of the investments? 

 

Thank you

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My company also offer bAV but unfortunately they have an agreement with specific brokers. What the broker told me was that I could take the money out even if I moved back into another EU country. is this information wrong?

 

That would be news to me. While the EU is trying to harmonize the company pensions within the EU, AFAIK there is no "QROPS"-like process so far in effect, i.e. you can't take the capital from the bAV with you into another similar plan in another EU-memberstate yet. Though I would assume that to become legally settled and normal within a few years.  You'll pretty certainly can't simply cash in and take the money out if you'll leave in a few years and move to another EU-memberstate, that would defy the entire tax saving purpose, though. If the broker your employer hired has different information, pls ask him to show printed proof of that.

 

Plus: if your employer insists to use just the one broker and only the plans this broker can offer (which makes a lot of sense from the point of view of the employer, no doubting that) you should at least get a seizable co-payment from your employer on one hand and a decent rebate on the initial costs (at least 50% in the form of a group rebate) as a balance to the limitation of your choices IMO. Have you checked for that yet? If not, you might want to ask the broker and/or HR or whoever is in charge of this at your employer about these points. If no rebate is given on the closing and administrative costs for the benefits of the employees, your employer should renegotiate this with the broker or with the insurance company

 

 

Quote

Also, shall I be able to access any type of online or paperwise form to see the evolution of the investments? 

 

You should get a yearly (paper) statement from the insurance company  that shows you the actual status and the performance of your plan. During the first year you should, however, never expect to have all the money in that was invested due to the "Zillmerung" in German plans.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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" if the new employer does not accept any other plans than the ones he set up, you can transfer the capital from your "old" plan to the new one. "

Won't I loose money if I transfer money to a new plan? Isn't it better to start a new plan and leave the money in the old plan?

After I reach the pension age and receive the money back, it will be taxed (ok) and I will have to pay the employers share and my share of the health insurance, don't I?

(I have a Direktversicherung for many years. In the first years the yearly report said "garanteed value: 1500000€, estimated value: 250000€. Every year the second number got smaller and smaller. Now they are almost identical. Frustrating. Not enough money to buy a new Ferrari. I will have to buy a used one.)

 

 

 

 

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Thank you all very much for your kind answer. I'll look into more details.

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I will also be in touch with the broker / intermediate to clarify the points raised by @Starshollow, I really just started the plan because of the information that I could retrieve the investment in case of leaving Germany. 

 

@Starshollowis it possible that I miss explained? I was not mentioning the money that my employer contributed nor the "growth" I meant the money that I paid, can't I get that back also? 

 

I'll get back to you 

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6 hours ago, AnswerToLife42 said:

" if the new employer does not accept any other plans than the ones he set up, you can transfer the capital from your "old" plan to the new one. "

Won't I loose money if I transfer money to a new plan? Isn't it better to start a new plan and leave the money in the old plan?

After I reach the pension age and receive the money back, it will be taxed (ok) and I will have to pay the employers share and my share of the health insurance, don't I?

(I have a Direktversicherung for many years. In the first years the yearly report said "garanteed value: 1500000€, estimated value: 250000€. Every year the second number got smaller and smaller. Now they are almost identical. Frustrating. Not enough money to buy a new Ferrari. I will have to buy a used one.)

 

 

 

 

Good evening, AnswerToLife! I have a feeling you have what in Germany is called a " klassische Rentenversicherung " or a " klassische Kapitallebensversicherung " ie your money is not invested in industry and the general economy in equities worldwide, Europe or whatever... etc but at the whim of your insurer (totally legal, mind you ).ie you get the legal minimum returns ( partly legal restrictions, partly German scared-of-risk, partly low interest rates anyway right now ).

 

Edit: can´t remember the latest  figure of what is guaranteed...(law!!)..somewhere around 1 per cent a year...not good..but it´s worse than that: one per cent of WHAT? NOT one per cent of what you pay in monthly but one per cent of what is paid in minus costs!!!

Can you confirm what  you have? Including its silly marketing name? eg Klassische Plus or whatever the dream department worked out...

 

You know what, even German judges have stuff like that...risk aversion...clever people but ...(personal opinion!)

 

I am a professional independent insurance broker and authorised advertiser. Contact me.
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Hello John,

you are right, it's a Kapital-Lebensversicherung as Direktversicherung. Not 1% but 3.5%. I signed it more than 20 years ago. Those days the interest level was 7.5%! When I left the company the deposit was transfered to a new insurance. The interest rate dropped to 3.25%

After some years my company than decided to go to the PKDW and I suspended the former contract.

Now a very large company bought my company and we have a new "Pensionskasse".

As a pensionist I will get my pension from 5 sources.

 

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17 hours ago, AnswerToLife42 said:

" if the new employer does not accept any other plans than the ones he set up, you can transfer the capital from your "old" plan to the new one. "

Won't I loose money if I transfer money to a new plan?

 

That depends. In many cases yes, you'd loose money because you already prepaid all the costs for the old plan and now you have some additional new closing costs in the new plan.
However, there are also two factors which play a role for the future development of your existing plan in comparison to a new one:

1) ongoing costs: if your old plan has high ongoing costs (including for the investment funds, if the plan is based on those), you might make less in profits in the future in comparison to a new plan with much lower costs (if you or your employer got themselves a good rebate on a new plan, that is). To change from an old high-cost-plan to a new high-cost plan is certainly always a bad idea, though.

2) if it is a pension plan based on investment funds, it matters a lot how much of the money invested is actually going to be invested into the investment funds. Some plans I have seen only put up 10% or so of your money actually in the investment funds...that way you can never really achieve good performance with the underlying investment funds, obviously.

 

Of course, if you have a classical plan based on guaranteed interest plus bonus interest only, it is most certainly a bad idea to move capital from the old plan (with much higher guaranteed interest rates) to a new plan

 

17 hours ago, AnswerToLife42 said:

 

Isn't it better to start a new plan and leave the money in the old plan?

 

Yes, that is usually the better idea. And, depending on your financial situation and how good or bad the old plan is, you can continue to pay in all by yourself in the old plan like with any other normal private pension plan (just you won't get additional tax benefits, though).

 

 

17 hours ago, AnswerToLife42 said:

After I reach the pension age and receive the money back, it will be taxed (ok) and I will have to pay the employers share and my share of the health insurance, don't I?

 

only if you are in public health insurance. In the latter, this is under discussion, though...hopefully this taxation issue will be solved and abandoned soon.

 

 

17 hours ago, AnswerToLife42 said:

(I have a Direktversicherung for many years. In the first years the yearly report said "garanteed value: 1500000€, estimated value: 250000€. Every year the second number got smaller and smaller. Now they are almost identical. Frustrating. Not enough money to buy a new Ferrari. I will have to buy a used one.)

 

 

Yes, that happens to most plans due to the steady decrease of interest rates on the markets. May pick up in the future again, though, when interst rates move up again.

But for comparison of pension plans I only ever look at the actual guaranteed values as you can see there best, how expensive a plan is in comparison to its peers.

 

 

Cheerio

 

 

 

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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12 hours ago, WhyNot_DE said:

I will also be in touch with the broker / intermediate to clarify the points raised by @Starshollow, I really just started the plan because of the information that I could retrieve the investment in case of leaving Germany. 

 

@Starshollowis it possible that I miss explained? I was not mentioning the money that my employer contributed nor the "growth" I meant the money that I paid, can't I get that back also? 

 

I'll get back to you 

 

According to my professional knowledge and experience it is quite evident that you can't get your money out if you move to another EU memberstate. Not within the current legislation, anyway.
Ask your broker/advisor to give you a written proof or statement that you can do as he told you, including referecing the legal sources for this.
AFAIK, only those moving to non-EU-countries with no bilateral social agreements with Germany can retrieve their capital if and when they can also retrieve their public pension capital.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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22 hours ago, AnswerToLife42 said:

(I have a Direktversicherung for many years. In the first years the yearly report said "garanteed value: 1500000€, estimated value: 250000€. Every year the second number got smaller and smaller. Now they are almost identical. Frustrating. Not enough money to buy a new Ferrari. I will have to buy a used one.)

Similar to what I have.

 

14 hours ago, AnswerToLife42 said:

As a pensionist I will get my pension from 5 sources.

Same here - I call it my patchwork pension & takes 5 times the effort to sort out.

 

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@Starshollow I tried to ask the broker/intermediary about the conditions to cash out my investment even if I moved into another EU country. 

 - I asked by saying that <have been ready on the internet>. He just said that my company has a lot of foreign employees and they had to do this several times without an issue. He forwarded me a form where it is highlighted the bank account I want to transfer my investment to. He didn't specify which law or to what shall I look into in more detail

 

The form is a simple Abmeldungformular and one of the reasons is "Kündigung des Arbeitsvertrag" 

 

Now, what shall I really ask to obtain a more detailed answer? 

 

He also informed me that I will get a detailed information about my investment soon (yearly) 

 

 

Thank you again

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@WhyNot_DE : yes, I would definitely demand that he gives you verse and chapter (i.e. the exact legal info) that YOU can definitely cash in when you leave the company/country.

As I explained above: yes, some foreigners who come from outside the EU and also move back to a country outside the EU after having stayed less than 60 months in Germany can get their bAV-capital paid out.

This follows in the wake of them demanding their own share of contributions back from the public pension. According to all knowledge that I have, if you have a right to get your own public pension contributions back, you also have a right to get your bAV paid out to you.

You can start to claim your public pension contributions back after you stayed 2+ years outside Germany/the EU. By that time - and probably after confirmation that you'll get your public pension contributions back - you can then claim the payout of your baV company pension capital.

 

Where this does not work is if you:

1. are a EU-citizen. because as such you normally have +60 months of pension contribution jointly from your home EU-state plus Germany and as such you are not eligible for public pension pay-out (and consequently not either for bAV-pay-out)  (see here more for info: http://www.deutsche-rentenversicherung.de/Allgemein/de/Navigation/2_Rente_Reha/01_Rente/01_allgemeines/05_rente_und_ausland/beitragserstattung_node.html )

 

2. if you move to another EU-member state when leaving Germany (as you will not be eligible for public pension pay-out, reason see above)

 

3. if you move to one of the other countries with which Germany has bilateral recognition agreements for social security contributions/pay-outs.  The list of these countries can be found here: http://www.deutsche-rentenversicherung.de/Allgemein/de/Inhalt/2_Rente_Reha/01_rente/01_grundwissen/05_rente_und_ausland/01a_grundlagen/01_02_grundlagen_sozialversabkommen.html

 

So, as you can see there are a number of hoops to jump thru before you can get something out of the public pension (and connected with that, from a bAV-company pension). If you do not have the right/eligibility to get a pay-out from public pension after you left Germany, it is my understanding and legal interpretation of the prevailing regulation that you also cannot get any payout from a company pension.

 

Now, there can always be some small loopholes in the laws. While I, as a specialist for Expats, believe I know the important ones all well enough, perhaps there is a clause that I do not know about regarding the bAV you joined with your company?

But before I would continue to pay into such a plan (if I were in your shoes) I would definitely demand in writing a confirmation from the broker (is he really a broker?) that (and how) you can get your money out when you leave Germany. Otherwise, it will be later your word against his when you have left the country and try to get your money paid out...a battle you can only loose in the end, especially if being fought from abroad.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Once again thank you a lot for the extensive explanations, @Starshollow

 

I have been tied up at work but I will try to contact this person again, 

as you say I am not sure he is a broker or he works directly to the company where the bAV is, will check his e-mail address again. 

 

I was really in the impression that I could take the investment out, even paying income tax (because I am putting it before tax so it will be income if it comes to it) but now I will try to push again, otherwise I will cancel the contract

 

will try to comeback with further updates

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