Pension from Germany and UK

67 posts in this topic

4 hours ago, murphaph said:

Wait, what? Voluntary NIC's are tax deductible here?

Welcome to the club.

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3 hours ago, Gambatte said:

Welcome to the club.

 

Well - thats we three as club committee plus Panda as financial advisor...

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9 minutes ago, HEM said:

 

Well - thats we three as club committee plus Panda as financial advisor...

 

Wot? 

No committee seat for moi?

 

I'm hurt

:(

 

 

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4 hours ago, Gambatte said:

Welcome to the club.

Luckily I haven't made any voluntary PRSI contributions in Ireland yet, though I have been "admitted" as a voluntary contributor. I have 5 years to start paying in once they present me with a "bill". I have no idea how they are going to assess my reckonable income. In Ireland the rate of voluntary PRSI is not fixed in most cases. It is a percentage of your reckonable income and if you have none or for some bizarre reason if you last paid PRSI at class S (self employed, rental income etc.) then it's a flat €500 a year, but that will buy at least 1/40th of a state pension, which is currently worth approx. €315 a year so you just need to live for 18 months or so after reaching pensionable age to get all your contributions back.

 

The bigger benefit of being "actively" in the Irish system is that one's spouse is entitled to a full survivor's pension (which is worth only slightly less than a full state pension) should one "not make it to retirement age" shall we say and that pension would be paid at the full rate for the rest of the spouse's life.

 

That these contributions appear to be tax deductible in Germany is a sweetener indeed. I honestly had no idea and would never have assumed them to be. Go Panda!

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I did not realise this either, nor did my account tell me about it, but to be fair I tell not tell my accountant I was doing it either

 

So, I guess I have lost the tax deductible for the last 30 years ...,, I suppose I was only paying 140 + pounds a year for class 2 contributions, so its not going to make a massive difference to me anyway.

 

OK, question, My company in Germany gives me a pension when I stop working, which I do not have to pay for at all, My company also lets me pay into another pension pot, which I get when I stop working.   Should either of these amounts be stated in line 5 or 6 ? as the latter pension maybe be classed as private as I am paying in for it, ok the company also contributes to it depending on how much private money I put into it.  

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I hope this is the right thread for this question!

I was a local government officer, and then a civil servant, for about 17 years in the UK in the 1980's and '90's. Then in 2000 I moved to Germany. In the ensuing years I reached the age of 60, so I now receive my UK Civil Service pension, based on the 17 years service. I also have a couple of rental properties in the UK. The net income is relatively low, but is slowly increasing since the mortgage on one of the properties has been paid off.

I therefore complete a tax return for both Germany and the UK, using WISO Steuer and TaxCalc software for the respective countries. The Civil Service pension is recorded on the UK tax return; and on the German tax return I include the net income on the "Ausländische Einkunft" section in WISO Steuer. I guess it was a mistake, but I entitled this "Vermietung" because the rental income started before I began to receive the Civil Service pension. Anyway, the income from both sources is included, but this has presumably confused the Finanzamt, who have now written to me, alleging that I have not included the UK Civil Service pension in my German tax return. 

The Finanzamt want copies of my UK tax return, which is not a problem; and they also want a description of the Civil Service pension. I have the impression this could be slightly sensitive, due to the different types of occupational pension. Does anybody know the correct terminology (in German)?

Having already looked at a couple of threads here on this and related topics, I note a contribution from   @PandaMunich, in which she says Krankenkasse contributions need to be paid on UK Civil Service pensions. I was not aware of that, and I have not found any facility in WISO Steuer to handle this aspect, or am I missing something obvious?

Thanks in advance for your thoughts and advice.

Nigel

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2 hours ago, relh6l said:

The Finanzamt want copies of my UK tax return, which is not a problem; and they also want a description of the Civil Service pension. I have the impression this could be slightly sensitive, due to the different types of occupational pension.

Excuse me, but nowhere in your description do I see an "occupational pension", which in German would be "betriebliche Altersvorsorge, i.e. something into which you paid in (tax-relieved) money while you were still working and which now pays you a pension: https://www.bvv.de/versicherte/english-information/

 

What I see is a pension as a former civil servant, which in German is a Beamtenpension, i.e. not something to which you contributed.

--> as long as you don't go and also take on German citizenship (which would make you run afoul of article 18 (2) of the double taxation agreement), only the UK gets to tax your UK civil service pension. In your German tax return, it appears in Anlage AUS, line 36: https://redaktion.lohnsteuer-kompakt.de/wp-content/uploads/sites/24/2021/11/06_Anlage_AUS_21.pdf

 

--> Just give them the copies of your UK tax return and tell them it's a Beamtenpension.

 

Up to 2020, your UK rental profit should not have been mentioned in your German tax return at all, since up till then, the UK counted as EU and the double taxation agreement between Germany and the UK lays down Progressionsvorbehalt for UK rental profit.
But EU/EEA rental profit is not subject to Progressionsvorbehalt, because of national German tax law, to be exact because of §32b (1) Satz 2 Nr. 3 EStG: https://www.gesetze-im-internet.de/estg/__32b.html

So no Progressionsvorbehalt on UK rental profit up to and including in the calendar year 2020.

 

Starting with 2021, since the UK is no longer "EU", your UK rental profit also has to be declared in Anlage AUS, and since you already used line 36 for the UK civil service pension, just use line 37 for the UK rental profit:

Your UK civil service pension and UK rental income do not get taxed again by Germany, they just drive up your German income tax rate on your other income, that is what Progressionsvorbehalt means.

For an example with numbers demonstrating this effect, please scroll down to the section "Progressionsvorbehalt" in here.

 

2 hours ago, relh6l said:

Having already looked at a couple of threads here on this and related topics, I note a contribution from   @PandaMunich, in which she says Krankenkasse contributions need to be paid on UK Civil Service pensions. I was not aware of that, and I have not found any facility in WISO Steuer to handle this aspect, or am I missing something obvious?

 

In Germany, tax and health insurance are located at different institutions.

You pay your public health insurance contribution to your public health insurer, e.g. Techniker Krankenkasse.

Nothing to do with your taxes at all.

 

2 hours ago, relh6l said:

I was a local government officer, and then a civil servant, for about 17 years in the UK in the 1980's and '90's. Then in 2000 I moved to Germany. In the ensuing year I reached the age of 60, so I now receive my UK Civil Service pension, based on the 17 years service.

 

Just to check that I understood correctly: you moved to Germany in 2000 and you turned 61 in 2001, so you are now around 81?

Or did you mean that you moved to Germany in 2020 and you are now around 61?

 

Because if you have already reached the normal pension age of 65 and do not also receive a German pension, you may be able to get free German public health insurance through the NHS, by applying there for the form S1 and then taking it to your German public health insurer: https://www.nhs.uk/using-the-nhs/healthcare-abroad/moving-abroad/planning-your-healthcare/

It works for sure with a UK social security pension, no idea whether it also works with a civil service pension. Let's ask @kiplette, she may know.

 

Otherwise, yes, you will have to declare your worldwide income from all sources (which from your description is your UK civil service pension and your UK rental profit) to your public health insurer and pay them 18.x% of it as your  public health&nursing insurance contribution.

To get an idea of how much public health&nursing insurance will cost you, enter your monthly income into this Techniker Krankenkasse calculator: https://www.tk.de/service/app/2004108/beitragsrechner/selbststaendigeRechner.app

Please see for the list of worldwide income on which German public health insurance charges contributions if you're a voluntary member of public health insurance (basically, all types of income there are): https://www.gkv-spitzenverband.de/media/dokumente/krankenversicherung_1/grundprinzipien_1/finanzierung/beitragsbemessung/2020-03-20_Einnahmekatalog_240SGBV_final.pdf

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I would understand the local government (LG) and Civil Service (CS) pensions to be "occupational pensions".  True, the CS pension was "non-contributory", other than a couple of % for a widow's pension until 2002 when the "Premium Scheme" was introduced, after which members of that scheme paid 3.5% and then from about 2012 (if memory serves) the contribution increased to up to about 8.5% depending on salary (I certainly paid that much) before dropping back after 2016 and the changes to the State Pension, to 7.35%.  The LG scheme has always been contributory.  The CS pension age was 60 until the 2012 or so changes when people under 50 moved to state pension age and the LG scheme has always been state pension age.

 

My understanding is that the DRV treats local government and Civil Service pensions as Betriebsrenten, according to their guidance on the application of §18a SGB 4 in relation to widow(er)'s pensions.  Not sure how the FA would treat them for tax in terms of the "type of pension" but certainly agree the Double Tax Agreement treatment as described.  Should you also have a LG pension then that too is treated as a government service pension for tax treaty purposes.

 

I'm assuming you did not turn 60 in 2001 but some time later, hence the use of "ensuing years".  I would also assume that you are entitled to at least 17 years worth of UK state pension (plus, potentially more years credited for your post-16 non-uni education) and wonder if you have considered paying voluntary UK contributions to boost that.  Until April 2023 you can (I think) still pay voluntarily for any years from 2006/7 onwards, even if you were also contributing to the scheme in another country) so probably enough to get you near the max of approx £9,500 per annum. 

 

You may be able to pay Class 2 voluntary NIC at £158.60 per year, to generate £267 extra annual pension per purchased year, so something of a no-brainer.  If you do not qualify for Cl. 2 then Cl.3 costs £800.80 per year, so 3 years to break even.  Have a look at booklet NI 38 on GOV UK and get hold of your NI record and a pension forecast.  Still 15 months to get things sorted but time ticks away when dealing with the CS, lol

 

I don't think the S1 works with only the CS/LG pensions as they rely on your employer, not the state, but as you must qualify for a UK state pension, in addition, presumably to a German one if you worked here for 20 years (which would also take your UK years into consideration under the EU coordination rules) I doubt that question will arise.  As Panda says, if you do not qualify for (or claim) the German state pension then you should get an S1.

 

You CS and LG pensions should be paid under PAYE.  There is no NIC to pay on those pensions.  The rental income and state pension will be covered by your personal allowance if its £12,570 is sufficient and the rental is less than £2,500 per year, otherwise you will have to complete a self-assessment tax return.  

 

Seems you will be doing various administrative tasks over the coming months - good luck.

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2 hours ago, relh6l said:

In the ensuing year

so he turned 60 sometime since 2000. Although his user name suggests he's 61 right now.

 

After normal pension age has been reached, then yep, apparently all good on the S1 with a civil service pension - edit to agree with GaryC that the entitlement comes from the UK state pension, but that he'll be on that anyway. Assuming no German pension. 

 

Nigel, how is your Krankenkasse currently organised? Do you have a German job? Will it give you a German pension at normal retirement age? You need 5 years for that.

 

Many questions, but they are important for good answers from anyone.

 

If you have a German job as an employee, your health insurance is fine at the moment and nothing to do with rent or UK pensions, so don't worry. If not, there will be back payments involved. After you retire, slightly different story, Panda's links above might have all that. 

 

Panda, if he is an employee and ends up with a German pension, will he go into the KVR or whatever it's called at state pension point? Can he find out if he is eligible in advance?

 

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Hi @PandaMunich,

Thanks for your prompt and comprehensive response. Hmm, try as hard as I might, I usually manage to make something completely unclear! In this case, no, I'm not 81, only 64 - with still about 16 months to work in Germany.

The Civil Service pension in the UK is non-contributory (for the employees); while the Local Government pension provides similar benefits, but is contributory. In my case, I worked in local government for 10 years 1980 - 1990, and then switched to the Civil Service until 1997. When I joined the Civil Service, I transferred my pension rights from the LG scheme to the Civil Service one, so those 17 years are covered by the one scheme.

Working out what contributions I paid to the LG scheme 40 years ago doesn't seem like much fun to me, but the Finanzamt seem to want that information.

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1 hour ago, PandaMunich said:

--> Just give them the copies of your UK tax return and tell them it's a Beamtenpension.

 

 

2 minutes ago, relh6l said:

the Finanzamt seem to want that information.

 

Or they might be happy with what Panda suggests? Less work, for sure :)

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7 minutes ago, kiplette said:

You need 5 years for that.

Indeed, he needs 5 years but they can be satisfied by UK years as long as he has a very small number of German contributions - 1 year?  Also, the UK years for post-17 education and a few other things like, I think, Azubi, can be credited as German years using a Kontenklärung.  Then the UK years will be added to those in their entirety and any overlaps ignored to get your total "German" years.  If that is more than 35 then the pension at 63 (actuarially reduced) is available; if more than 45 the version at 63+ (not reduced) is up for grabs.  I have literally just got my Bescheid for pension at 63 using about 25 UK years to get me past the 35 mark!

 

The DRV will put him in the KVR unless he can demonstrate that he is otherwise covered - they assume for me as a UK resident that I am covered by the NHS but I am required to inform them if that is incorrect.

 

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8 minutes ago, relh6l said:

Working out what contributions I paid to the LG scheme 40 years ago doesn't seem like much fun to me, but the Finanzamt seem to want that information.

I don't get why the FA has any interest in those contributions.  They have no right to tax the CS pension and need to know only the amount for the purposes of Progression.  As Panda says, their only interest is via §32b

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If he wants an S1 he'd be trying to avoid a German pension like the plague. 

 

His last post suggests he's been working here for 20 years, anyway, so the S1 is not going to be a likely outcome.

 

Hopefully he's an employee, otherwise the KK will want backpayments on the pension. That's what first struck me.

 

Oh -  to be in the KVdR requires that you have 90% of the second half of your working life in a public health insurance or somesuch. Loads of people are not entitled to be in it, and their Beiträge are higher in general as a result. Nigel sounds like he's OK, if he's an employee in a normal public Kasse, all is good.

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Thanks also to @GaryC and @kiplette for your responses as well. I will read and digest them in detail tomorrow.

To clarify a few more points, I have worked in Germany since 2000, including a period of self-employment. I have been with my current employer since 2012.

I will check up on the question of voluntary contributions, as it might still be possible. I had an idea that there was a cut-off point, but that may be my imagination.

I haven't taken German citizenship, and have no plans to do so.

relh6l - nothing to do with being (or having been) 61. It's my favourite type of coach. Sad, I know, and even sadder, I have one in the UK being slowly restored to it's former glory!

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Normally NIC can be paid up to 6 years after the year to which it relates, so if you paid now you could always pay for 2015/16 onwards (if I've got my maths right) but after the new state pension was introduced on 6 April 2016 a special rule was put in place to allow people to fill not-full years 2006/7 to 2015/16 Voluntary National Insurance: How and when to pay - GOV.UK (www.gov.uk)

 

"You’re a man born after 5 April 1951 or a woman born after 5 April 1953

You have until 5 April 2023 to pay voluntary contributions to make up for gaps between April 2006 and April 2016 if you’re eligible."

 

So, you should still get all years 2006/7 to 2021/22 (and later) filled if it is worth doing.  You can only pay NI in any shape or form until 5 April before you turn whatever for you is the gradually rising state pension age -  I assume at 64, yours will be 66...

 

Once you have your NI record and preferably the pension forecast, call the DWP Future Pensions Centre.  I think there is a normal number on GOV UK but if 0800 numbers work from Germany it's 0800 731 0181. 

 

Voluntary National Insurance: Eligibility - GOV.UK (www.gov.uk)

And to save you searching the NI 38 is here Social Security abroad: NI38 (publishing.service.gov.uk)

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3 hours ago, relh6l said:

The Finanzamt want copies of my UK tax return, which is not a problem; and they also want a description of the Civil Service pension. I have the impression this could be slightly sensitive, due to the different types of occupational pension. Does anybody know the correct terminology (in German)?

Just had another read of this.  I am not sure why the FA wants a description of the CS pension, other than to inform them that it is a Government Service pension over which the UK retains taxing rights under Article 18(2) of the double tax treaty. 

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@kiplette

You're right, I hadn't seen that "s", so in my view he had said that he reached age 61 "the ensuing year".

Ah well, it has been a long day.

 

@relh6l

If you're an employee, then you don't have to contribute anything extra to public health insurance because of your UK civil service pension or your UK rental income, since you are either:

  • a mandatory member of public health insurance i.e. somebody whose yearly gross salary is under the Versicherungspflichtgrenze of 64,350€: they only pay public health&nursing contributions on their gross salary
  • a voluntary member, i.e. someone whose yearly gross salary is above 64,350€, but with it being that high, you are already contributing the maximum possible contribution just through your employment (which is based on the Beitragsbemessungsgrenze of 58,050€ gross salary per year), so the extra pension and rental income can't "hurt" you, you can't pay more than the maximum contribution

You will for sure get a German social security pension if you have been working as an employee since 2000, so yes, forget about the form S1.

 

However, since you spent more than 90% of the second half of your work life in EU public health insurances, once you get your German pension from DRV, you will become a mandatory member of public health insurance through the KVdR (Krankenversicherung der Rentner) which means that you will only have to contribute to public health&nursing insurance based on your pensions, not also on your other income like your UK rental income and capital income.

 

If you should have one of the professions (medical doctor, dentist, architect, lawyer, ...) that do not pay their public pension insurance contributions to DRV (Deutsche Rentenversicherung), start paying voluntatry contributions to DRV immediately, you need to start accumulating the 60 German pension months (cost: 18.6% * 450€ * 60 = 5,022€) that you need to get a minuscule DRV pension, so as to get KVdR status once you retire (which means not having to pay public health insurance on your rental profit once you retire).

To read the post, click on the blue title, it's a link: 

 

Please also read:

 

I second @GaryC's suggestion of paying voluntary NI contributions.

They are tax-deductible, the same way German public pension contributions are and a much, much better investment:

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Thanks again for the further comments and advice. I will read and analyse them carefully over the next couple of days, as I have about three weeks to reply to the Finanzamt.

@PandaMunich - You didn't see the 's' because it wasn't there initially. I corrected it a few minutes after posting, when I realised that the absence of the "s" made nonsense of the sentence!

Yes, I am an employee, and my salary is under €64,350, so that I am a mandatory member of the public health insurance system (Techniker Krankenkasse). Regarding the 90% of the second half of my working life (which is not yet finished), I will need to do some calculations, as I was self-employed from 2007 to 2012, and therefore in a different health insurance. I work in IT, so my public pension contributions are paid to the DRV.

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I'd say that 90% rule catches an awful lot of people out and ends up in them being excluded from the KVdR. Even a few years of self employment later in your career and bang, you're out. I hope the figures are favourable to you relh6l.

 

To anyone else reading: Voluntary contributions to the GKK count, as does family membership, as time spent in the GKK. Think long and hard about leaving the GKK during any periods of self employment, especially later in your working life.

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