Pension System in Germany


Written by Germany Simplified

October 31, 2020

The German Pension system ranks 13thin the list of the best pension systems in the world. Whether you want to retire in Germany or anywhere in the world, you need to know all about the German Pension system which is a lot more advanced and beneficial than many other systems around the world.

Just like a lot of countries, even Germany’s pension system is based on 3-pillars. These three pillars resemble different pension types that are available to the Germans. Previously, a lot of the retirees got payed heavily by the German Statutory Pension system but with the advancing times, there were a lot of advancements made in the way German pensions are given out.

The three pillars of the German Pension System are: –

  • Mandatory State Pension- This pension is also known as the Public Retirement Insurance. This is a sort of a compulsory pension. All Germans have to participate and contribute in this pension. This pension is paid by employees and government subsidies. There are huge chunks of money that are paid to pensioners rather than saved or invested in the German system.
  • Company or Occupational Pensions- These are involuntary pensions that are offered by employers to their employees. These pensions are given out on the basis of building goodwill of the companies. Employers are liable to give their employees a certain some of money as pension as what is a part of the company policy.
  • Private Pensions- These pensions are pensions that you can take as individual pension investment plans. These are set up by banks and investment providers. This can increase your German pension entitlement at the you receive your pension.


German Pension Age

The German Pension system is undergoing some fundamental transitions regarding the official pension age currently. It used to be 65 years of age but within the time of 2012-2029 it is supposed to shift to 67 years of age. This basically means that anybody at the age of 67 is liable to get a pension from the German Government.

If you have served in the German workforce for more than 35 years, you can ask for an early retirement. If this is the case, you can retire at the age of 63. The early retirement system also has its drawbacks. You will get a deduction of 3.5% of your pension for every year that you are not working until the official pension age in Germany. This basically means that if you stop working at 63 years of age, you will have to get a deduction of 3.5% every year until you are 65.

However, this rule changes if someone has worked for 45 years in the German workforce. If there is 45 years of work experience in the German workforce, there will be absolutely no deductions for early retirement.

Supplementary Pensions in Germany

Germany is the place to retire because of the massive array of benefits it offers. Germans can top up their state pension with company pensions. People have started opting for Supplementary Pensions in the past few years because of the additional Government subsidiary benefits and tax breaks.

  • German Company Pensions

These pensions are pensions offered by German employers to their employees. More than half of the German population takes part in this occupational pension scheme. There are two kinds of occupational pension plans. They are: –

  1. Direct Pension Promise- In direct pension promise, the employer has to pay a certain pension amount to their employee as what is agreed upon between the two previously.
  2. External Pension Plans- External Pension Plans are plans wherein the employer makes a plan with an external service provider for something like life insurance, employee insurance and much more.

Every other German employer scheme has some or the other benefits to offer their employees. This is done to attract prospective employees to join the business. The benefits can be super helpful for an employee in the longer run.

  • Private Pensions

Everybody nearing the pension age in Germany can make themselves a way to get personal pensions through service providers. This plan too has a number of schemes to choose from: –

  1. Reister Pension Plan- The Resiter pension plan is a life annuity plan where the government is supposed to pay subsidies yearly towards your plan. 4% gross annual income needs to be paid by you. This is a good pension option for low income earners.
  2. Basic Pension Plan- This is an ideal pension plan for freelancers and businessmen. It is a flexible plan which attracts high earners.

Other Pension Options

  1. Miner’s pension- This is a special kind of pension available to mine workers. This pension is paid at 61 years of age with a qualifying period of 25 years. This pension is brought about in the recent years to promote the profession of working in mines.
  2. Invalidity Pension- This is the kind of pension provided to people who have been out of work due to some illness or injury since a couple of years. The only requirement of this pension is that a person needs to be ill or injured for three to five years at a stretch. Only then will a person be eligible to receive this pension.
  3. Bereavement Pensions- These pensions are pensions which cover orphan’s pensions, child raiser’s pensions and survivor’s pensions.

Application for German Pension

It’s not the easiest task to get a pension in Germany. You will not get your pension automatically on your 65thbirthday. You need to provide necessary documentation such as a valid id, proof of insurance, and many more important certificates and documents. If you are not able to provide necessary documents in time, it may result in a delayed pension. You need to either physically go or send an email to the German Pension Authority in order to get your pension started. They will then revert to you with applications forms which will determine whether you are qualified to get a German pension or not.


The German pension may be a little difficult to understand but it is super helpful indeed. Read the article to know all about how the German Pension System works.

 Read here to know more about Health Insurance System in Germany

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