Pension from Germany and UK

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I worked in Germany for 15 Years and contributed to the pension scheme. I moved to the UK and working here for the last 10 years and took British Citizenship ( still keeping Germany citizenship)  due to Brexit.  My question is if get a pension from Germany and the UK when I retire while working in the UK?

 

 

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Under EU laws yes.  But if this will still be upheld after Brexit by the time you come to retire, then nobody knows!  

 

Basically at the moment it works that you apply for your pension in the country where you are living and inform them of the fact that you have been living and earning in other EU countries, and they will then claim those parts of the pensions from the other countries according to the pension rules of each country.

 

More details here:

https://europa.eu/youreurope/citizens/work/retire-abroad/state-pensions-abroad/index_en.htm

 

 

So you need to hope that the UK and EU/Germany agree a favourable (for you) deal on pension rights during negotiations.  Or, if not, that Germany introduces laws/rules to allow you to still claim your German pension.

 

 

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But wait a sec... pension are never given based on citizenship or residence. Oder...?

Pensions is something that you (should) get, as a result of paying into the system. Wrong?

Of course taxation is/are based on citizenship and residence, but not pensions...

 

You paid into the German system you get a German pension.

You paid into the UK  system you get a UK pension.

 

How when whom to formally apply, and tax, are different issues though...

 

Could well be that I'm wrong but that's the way I see it. 

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9 minutes ago, Gambatte said:

But wait a sec... pension are never given based on citizenship or residence. Oder...?

Pensions is something that you (should) get, as a result of paying into the system. Wrong?

Of course taxation is/are based on citizenship and residence, but not pensions...

 

You paid into the German system you get a German pension.

You paid into the UK  system you get a UK pension.

 

How when whom to formally apply, and tax, are different issues though...

 

Could well be that I'm wrong but that's the way I see it. 

 

Yes this is right.  

 

Sorry, I see now that my statement might be contrived as "after Brexit you might not get a pension".  I didn't mean that, I meant that the process of how you receive it might change.

So whereas now you can apply in any EU country where you live for a pension from any other (inc. multiple) EU country, in the future the OP might have to apply individually to the UK and Germany.

 

Today for example you could apply for a pension while living in Spain.  Spain would be responsible for the administration of the pension, dealing with the foreign authorities, even though it might be UK & Germany actually paying the pension.  In the future if living in Spain one might have to apply to the UK and to Germany individually and manage the administration oneself.

 

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This is a subject close to my heart as my wife and I are approaching a certain age and live in the UK having worked in Germany.

 

As stated, at the moment (in somewhat simplified terms) under EU rules each country does a calculation based only on their pension rules.  For instance, the UK requires you to have at least 10 qualifying years, whereas Germany requires only 5.  So, if you had only worked in the UK for 8 years you would not get a pension under the UK rules.  As you have 10 years in Germany you would get one under those rules but you would not qualify under the 35-years rule to take your pension at 63.

 

Each country then does a calculation based on your total qualifying years in all EU countries, so 18 in the above example.  This means you do have enough years for a UK pension, so you would get 8 years worth of UK pension based on the 8 qualifying years here - 8/35 x 168.60 = £38.53 p.w. as of today.  You would also have a calculation done in Germany based on 18 qualifying years and if that results in a higher amount than other calculation you get the higher amount.

 

For instance, my wife had about 12 qualifying years in Germany and about 34 in the UK when she reached 63, so under EU rules she had more than 35 years meaning she could apply to take her German pension at 63 (actuarially reduced by 0.3% per month).  In this case the calculation under German-only rules is zero as she has only 12 years, not the required 35. The comparison was therefore between nil and a pension based on those 12 years at 63 when the UK years are added in.  When she reaches 66 we will then apply to the UK for her UK pension.

 

If the UK and EU reach a deal on social security pensions that looks very much like the above (at least for those already in the system) then the rules may stay the same.  If, on the other hand, they do not, then my guess (and it is only a guess) is we will end up with something where each country would apply only its rules and not do the comparison mentioned above. So, in our case we would not be able to take the German pension at 63 but would still get a pension based on the 12 qualifying years.  For the UK we will simply get a UK pension based on the full 35 at 66.

 

As I am looking to take my German pension at 63 as well, I sincerely hope that a sensible solution is agreed upon...

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1 hour ago, GaryC said:

the UK requires you to have at least 10 qualifying years

Do you have a reference?

I think/thought this was an old rule and no longer applies. I vaguele remember reading somewhere the minimum number of years of NI contribution for a UK pension was lowered to 1. "if you paid a little you get a little" sounds fairer that "if you paid little you get zero". But of course nobody with enough life experience is naive enough to expect fairness... 

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14 minutes ago, Gambatte said:

Do you have a reference?

I think/thought this was an old rule and no longer applies. I vaguele remember reading somewhere the minimum number of years of NI contribution for a UK pension was lowered to 1. "if you paid a little you get a little" sounds fairer that "if you paid little you get zero". But of course nobody with enough life experience is naive enough to expect fairness... 

 

https://www.moneysavingexpert.com/savings/state-pensions/

 

 

 

Quote

 

Under the state pension rules that came in on 6 April 2016, you need a minimum of 10 years before you'll get any payment at all. Reach this and you'll be paid 10/35ths of the total – currently £168.60 – which is about £48 a week. These qualifying years can be from before or after 6 April 2016 and don't have to be 10 years in a row – they can be dotted about over a much longer period.

However, if you don't meet this 10-year minimum, you won't get a penny (although pension credit should be available). Under the previous system, there was no minimum – you could still get a small payout even if you had just a few years of NI contributions.

 

 

(My bold)

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And try this link https://www.gov.uk/new-state-pension 

 

If you are in the UK you could set-up your Personal Tax Account with HMRC.  It is the new online way to access your tax and NIC information.  It also gives quick access to your state pension forecast (based solely on your UK record).  https://www.gov.uk/personal-tax-account

 

To be honest, other than seeing your PAYE tax code its real value at the moment is to see your NI record and state pension forecast.  I guess as it is further developed it be more useful on the tax side too...

 

Oh, and in the UK it is worth considering paying voluntary Class 3 NI contributions.  You can top up the previous 6 years (more in certain circumstances).  For each year you pay you get 1/35 more pension.  You should talk to DWP before deciding whether to pay - it all depends on how many years your will amass anyway before retirement age of 66+

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Does anyone know what happens with the UK vs German system, regarding payments vs contributions?

As Gary points out, the UK pension is based on 35 years of meeting some minimum threshold of contributions.

For each year of the 35 contribution years, you get 1/35th of the total amount payable as a state pension. Thus 1/35th of £168.60 = £4.81 a week or around £250 a year.

 

Yet the german pension is based on what percentage of average earnings you contributed in a given year.

Thus the CEO/high income earners pay much more, but receives much more in retirement.

The low wage earning cleaner, by comparison, is pays what seems like quite a lot, but gets in return a pittance to live on in retirement.

 

If a UK person retires in the EU, say Germany, does the UK still pay it's state pension at the same rate as before?

If say you have 35 years in the UK pension system and 5 in the German one, would you both the UK £168.60 per week AND the German xxxx Euros?

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9 hours ago, scook17 said:

If a UK person retires in the EU, say Germany, does the UK still pay it's state pension at the same rate as before?

If say you have 35 years in the UK pension system and 5 in the German one, would you both the UK £168.60 per week AND the German xxxx Euros?

 

 

If you register with the HMRC, you can get a statement of how much they'll pay as a pension.

You can even increase this by adding voluntary contributions even if living in Germany.

 

German pension is on top.

By getting an appointment with your local branch of the DRV they'll supply

an estimate of your German pension. They'll also send this annually.

 

Good idea for all to kick this off long before applying for the payout incase

there are any gaps or missing details. 

 

Note, that as an employee, I only see these pensions from an employee point of view.

Self employed and also civil servants have different rules as well as different contacts.

 

See also Toytown uk-voluntary-contributions 

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12 hours ago, scook17 said:

If a UK person retires in the EU, say Germany, does the UK still pay it's state pension at the same rate as before?

If say you have 35 years in the UK pension system and 5 in the German one, would you both the UK £168.60 per week AND the German xxxx Euros?

Works for me.  Also they get taxed differently - UK state pension is taxed in UK according to DTA & thus you get the first 11,000 GBP UK tax-free.

As has been written many times elsewhere on TT the Germans have a back-door to tax the UK pension (to the amazement of HMRC) called Progressionsvorbehalt but at least its not as bad is if they tax it in full.

 

2 hours ago, HH_Sailor said:

You can even increase this by adding voluntary contributions even if living in Germany.

One of the best things (financially) I ever did & the tip / advice to do so came from our very own @PandaMunich

Paid for itself in the first year of retirement (I'm now just about the enter year 3 & am thus winning...).

 

 

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I agree the comments of others.  The UK personal allowance this year 2019/20 is actually £12,500 https://www.gov.uk/income-tax-rates

 

The payback period for voluntary contributions differs depending on whether you have to pay class 2 or class 3 National Insurance contributions (NIC).  for the former the payback is as HEM says; for the latter it is about 3.25 years but still a good deal and better, I think, that considering German voluntary contributions.

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Due to a significant administrative overpayment on my voluntary NI contributions, I've already got the 35 years payments for a UK pension. I was noticing on another thread about the Ruerup pension being tax deductible, and was wondering whether as a freiberufler it makes sense to double-down and get a German pension as well. Has anyone done this? I have other investments which I was intending to use to fund retirement, but the tax advantages would seem to make doubling-down attractive, particularly if, as seems to be the case from check24, Ruerup can be invested (I'm guessing, a bit like a Sipp).

 

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You can find some good info about RÜRUP pensions here (some of the numbers are a bit outdated but will be renewed soon): https://www.crcie.com/financial-advice/self-employed/ruerup-basis/

A plus of the RÜRUP pension is that you cannot loose it, i.e. nobody can take if from you even if you should face bankruptcy.

On the other hand, there is no cash-option, i.e. you will get a pension paid out for the rest of your life only. Can be a very good thing for some, for others the lack of flexibilty is a no-go. Up to you.

What is important: look at the cost-side of the plans. Most plans in Germany come with pretty steep commission deductions. Look for

a) financial stability of the pension provider/company

b ) for low general costs

c) for low commission costs

d) for a good and widely diversified selection of investment funds, especially index funds.

 

Cheerio

 

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

A plus of the RÜRUP pension is that you cannot loose it, i.e. nobody can take if from you even if you should face bankruptcy.

Is this not the case for every plan that is officially labeled "pension"?

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40 minutes ago, dstanners said:

Due to a significant administrative overpayment on my voluntary NI contributions, I've already got the 35 years payments for a UK pension.

I am sure you are correct in that you have more than 35 years but what does the bit about administrative overpayments mean?  And, given that the UK system changed in 2016 and those with pre-2016 year had to be transitioned to the new rules, it is not quite as simple as having 35 UK years.  Have you got yourself a Pension Forecast from GOV UK or via snailmail and if so, does it show that you already have the max £179.60 per week at 2021/22 rates (£185.17 or so from April 2022)?

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17 hours ago, GaryC said:

what does the bit about administrative overpayments mean? 

When I moved to Germany (over 5 years ago) I already had over 25 years of contributions, and I registered for and started paying class 3 voluntary contributions (after reading advice from PandaMunich on this forum as it happens). Class 3 is a really nominal sum (off the top of my head, I think it might even have been less than £100 per year). For the last two or three years, I was sent payment requests for class 2 contributions in error, and then (due to not reading my post thoroughly) I paid them too. It's not a huge sum, again I don't have the precise amount, but I think it was about £1-2,000 a year. I finally spotted the mistake this year, and contacted HMRC. They agreed to move my overpayment of class 2 onto my existing class 3, which will be well over 10 years worth of contributions. 

So - does anyone else make both German and UK contributions?

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For the record, I have UK and German contributions and am currently paying Class 3 voluntary NIC as I am drawing an occupational pension so not paying Class 1 NIC.  We, the wife and I, are at the age where we are beginning to claim our various state pensions...

 

Ok, so there is a lot in your comment that needs unpacking.

 

The first point is that just because you had 25 years on your NI record when you moved to Germany does not mean that they all "count" towards the 35 years under the new rules that came in in 2016.  They might, but it depends on what you were doing in the UK for those years.  The main question is, "Did you have an occupational pension while in the UK and if so was it 'contracted out'?"  If you did then the calculation a 6 April 2016 to transition you to new rules, i.e. to give you a "starting amount" under the new rules could mean that the amount you were allocated is not equal to 25/35 x max weekly new state pension.  Let's assume your 25 years are pre 2016/17, so all under the old rules. The starting amount using 2021/22 figures is the higher of:

  • 25/30 x £137.60 = £114.67 (plus potentially any amount of "second state pension", called additional pension under the SERPs and S2P rules - if you were not contracted out)
  • 23/35 x 179.60 = £128.29 less your COPE figure if you were contracted out.  This can be large, maybe more than £50, so can drastically reduce this number

As I say, you get the higher of those two amounts (whatever your numbers actually show) and then add £5.13 for each full/qualifying UK NI year after 2015/16, i.e. 2016/17 onwards.  It matters not whether you pay compulsory or voluntary NIC.  If your starting amount was £128.29 then yes, you need 10 more qualifying years to get to £179.60, i.e. 128.29 + (10 * 5.13) = £179.60.  But if it was £114.67, then you would need 13 more years, i.e. 114.67 + (13 * 5.13) = 181.36, limited to 179.60, meaning in total you would pay NI for 38 years.  You really need to look at and understand your pension forecast to know where you stand and to then discuss the issue with DWP.

 

The second point is which NIC you should be paying.  If you are employed you pay Class 1 NIC and if you are self-employed you pay Class 2 and Class 4 NIC.  If you have both an employment and self-employment you pay all 3 types for that year unless your earning are above certain limits.  If you are not employed or are drawing an occupational pension and are resident in the UK you do not pay Class 1, 2 or 4 NIC and would generally pay Class 3 voluntary NIC to fill the relevant year(s).  There are a few exceptions listed on the HMC website but the starting point would be Class 3 at, currently, ££800.80 per year.  If you are on that short list of exceptions or you are not UK resident then you may be eligible to pay Class 2 voluntary NIC at, currently, £158.60 per year.  You only ever pay one type of voluntary NIC - either Class 3 or Class 2.  Booklet NI 38 sets out the criteria to be met to be able to pay Class 2 as a non-resident.

 

So, I think you need to look closely at your pension forecast (which allows you to calculate how many years you need and shows any figure for COPE) and at your NI record to work out how many more years you have to pay.   If you pay NI in error then my reading of the law is that you can get back without time limit.  Indeed, I was repaid erroneously paid 2007/8 NI last year!

 

Good luck

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1 hour ago, dstanners said:

does anyone else make both German and UK contributions?

Yes, many people do.

If you work in Germany, I don't think you have a choice regarding paying German contributions.

I was resident and employed in the UK until 2013 when I moved to Germany. Since then I've continued to pay voluntary NIC in the UK.

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