Can you put money in your bank account through the Post Office? Find out everything you need to know here in this handy guide.
If you’re thinking of retiring in Germany, one of the first things to do is check whether you’re eligible for a German state pension.
It’s easy to see why you may want in. According to the 2020 Global Retirement Index, the German pension system is ranked at 10th in the world¹. It consists of the mandatory state pension, called the Public Retirement Insurance or Gesetzliche Rentenversicherung (GRV). Plus, company pensions and private pensions.
In this guide, we’ll give you the lowdown on the state pension in Germany, including whether you may be eligible as a UK expat. We’ll also cover handy tips if you’re thinking of moving or retiring to Germany, including how to transfer your UK pension and alternatives to the German state pension if you’re not eligible for one.
And if you’re retiring in Germany, you’re going to need a secure, low-cost and easy way to manage your money. This is where Wise comes in.
Get your Wise multi-currency account and you can send money back to the UK in just a click or a tap, for tiny fees and the real, mid-market exchange rate. Plus, you can spend in EUR just like a German local with a Wise debit card. All currency conversions happen automatically, and at the fairest exchange rate you can get. You won’t need to convert from GBP to EUR first, you can just tap, spend and go.
But more on this later. Let’s start with the basics you need to know about the state pension in Germany.
Here’s a quick at-a-glance guide to the state pension in Germany, with all the basics you need to know:
- The state pension in Germany is called Gesetzliche Rentenversicherung (GRV), or Public Retirement Insurance
- Participation in the pension is compulsory for employees working in the country
- Contributions are paid by employees (through a percentage of their salary), employers and through government subsidies - similar to the UK
- The German pension system is overseen by the Federal Ministry of Health and Social Security
- The main provider of state pensions in Germany is the Deutsche Rentenversicherung Bund – DRB, or German Retirement Insurance Fund.
- The state pension provides payments of around 70% of working income on retirement², and there’s also a means-tested scheme for pensioners on low incomes.
- The average pension is around €2,907 a month for a married couple, €1,875 for a single male pensioner and €1,617 for a single female pensioner³.
The official state pension age in Germany at the moment is 65 years and 10 months, for both men and women.
However, this will gradually go up in the years to come. By 2031, the retirement age is expected to be 67 years old.
If a person has contributed to the GRV pension scheme for at least 35 years, they may be able to retire early and receive their state pension. In this case, you can retire at 63 years old.
However, you will lose some of your pension entitlement for the months you would have worked if you’d retired at the official retirement age. Contribute to the GRV for 45 years though and you can retire at 63 without losing any of your entitlement.
German citizens are of course eligible for the state pension. In fact, it’s mandatory for employees and employers to participate in the Public Retirement Insurance scheme.
If you’re a permanent resident or expat, you’ll need to work in Germany for at least five years⁵ to be eligible to receive the state pension when you reach retirement age. However, periods of education or training, illness, time taken out from work for childcare or other caring responsibilities may also be taken into account.
You may also need to meet other requirements, such as the age threshold. Here’s what you need to know⁵:
- For people born between 1947 and 1958 - the retirement age is 65 years but is pushed back one month for every following year
- For people born between 1959 and 1963, the retirement age of 65 years is pushed back by two months for every following year
- For people born after 1964, the state pension eligibility age is 67 years old.
If you’ve not worked in Germany for at least five years, but you have met this qualification period working elsewhere in the EU, you may be in luck. If you’re an EU citizen, you may be able to use these years worked in other EU countries to qualify for a basic German pension. You can find out more on the EU website.
If you’ve worked in Germany for at least five years and believe you’re entitled to the state pension, you’ll need to apply in advance. Make sure to do this well in advance of reaching retirement age.
You won’t receive state pension benefits automatically in Germany. Instead, you’ll need to download and complete the pension form from the Deutsche Rentenversicherung (German Pension Insurance) website. You can also get it from your pension provider, or ask your employer for advice.
You’ll need to provide documentation along with your application, including⁴:
- Valid ID
- Proof of insurance
- Proof of residency or visa status
- Relevant certificates (i.e. a death certificate if claiming a survivor’s pension)
If you find you’re not eligible to access the state pension scheme in Germany, there are alternatives available. Let’s take a look at a couple:
The third pillar of the German pension system (along with state pensions and company pensions) is private pensions. These are set up and run by banks and insurance providers, and there are a couple of types to choose from.
Private German pension options include:
Riester Pension Plan - this is a life annuity scheme where you pay a minimum of 4% annual income in, and the government will pay yearly subsidies towards your plan. You can choose from a range of investing variables to match your circumstances, and you will pay tax on your pension benefits.
Rürup or Basic Pension Plan. This is a good option for self-employed workers in Germany, for whom participation in the Public Retirement Insurance scheme isn’t mandatory. You can pay up to €23,712 per year into your Rürup plan, and 86% of your contributions will be offset against tax.
Private fund-based pension schemes. These plans can be used to top-up your state pension entitlement, or used flexibility in conjunction with other pension schemes.
As an UK expat in Germany, you’ll need to check whether or not you’re eligible for one of these private pension plans. You may need to meet qualifying criteria, similarly to accessing the German state pension.
Under the Qualifying Recognized Overseas Pension Scheme (QROPS), British citizens moving abroad can transfer their UK pension over to their new country of residence. This means you can receive a UK pension income even while enjoying retirement in Germany.
Before transferring your pension to QROPS, make sure you get reliable advice from a pensions specialist. There are both pros and cons to doing this, and you need to make sure you meet the required criteria and get permission from HMRC to transfer your pension abroad.
What happens if you work in Germany for less than five years and make pension contributions, but decide to move before you meet the minimum qualifying period? In this case, you can claim a refund for these contributions.
Be careful though, as once you apply for your state pension refund, you relinquish the right to claim any German pension in the future. It’s always a smart idea to get pensions advice from an expert.
To be eligible to claim, you’ll need to have been abroad for two years after making your last pension contribution. You can’t claim a refund if you’ve worked in Germany and made pension contributions for five years or more.
We’ve looked at the state pension situation for UK expats moving or retiring to Germany. But what about the other way around?
If you’re eligible for a German state pension, either as a citizen or by working there for the qualifying period, you can still receive your benefits if you move abroad - such as to the UK. The amount you’ll get depends on how many years you made contributions for and what age you retire, along with other factors.
You can also receive benefits from a private pension abroad, although you’ll need to check with your employer about receiving company pension benefits.
Your pension payments will usually be paid into a German bank account. You’ll then need to transfer the money over to your UK bank account.
The cost of this transfer will be covered by the German Pension Insurance scheme. However, either or both of your German and UK banks may still charge international transfers, and an unfavourable exchange rate could further eat into your money.
There is a clever way you can get round this though, using the Wise multi-currency account.
Wise multi-currency account can make life easier for expats and retirees in lots of different ways. For starters, you can use it to save money when receiving German pension benefits in the UK.
When you open a Wise account, you can get your own EUR IBAN account details. Use these details to receive your German pension in EUR. The money lands in your Wise account - in which you can hold multiple currencies at once - and you can convert to GBP at your leisure.
Why do this instead of sending from an ordinary German bank account to a UK bank account? Well with Wise, there’s only a tiny fixed fee to pay to convert balances in your account (i.e. from EUR to GBP) and you’ll always get the real, mid-market exchange rate, with no mark-up added on top. This can be far cheaper than using banks, so you get more of your pension benefits.
If you’re lucky enough to be enjoying retirement in Germany, you can use Wise to manage your money - again, saving a bundle on exchange rate mark-ups and fees.
For example, you can send money back to the UK for tiny fees, and spend in EUR using the contactless Wise debit card. There’s no need to convert currency first - you can just tap with your card and shop just like a German local. The card is linked to your Wise account and converts currency automatically at the mid-market rate.
So, there you have it - everything you need to know about the state pension in Germany. We’ve covered it all, from how the German pension system works and who is eligible, through to transferring your UK pension over to Germany.
And of course, we also looked at the smart way to manage your money and pension benefits whether you’re retiring in Germany or the UK - using Wise.
Sources used for this article:
- Natixis - Global Retirement Index
- I am Expat - pensions and retirement age in Germany
- I am Expat - average German pension
- Expatica - state pension in Germany
- Europa.eu - Germany (pensions and and other old age benefits)
Sources checked on 9th April 2021
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
A helpful guide on how to delete an IG trading account, including how to contact IG customer services for assistance.
Everything you need to know about the ASDA Money Credit Card, including rates, fees, features, benefits and more.
Read our comprehensive step-by-step guide on how to get a private pilot’s licence in the UK, including licence types, requirements, and the cost.
Check out our essential Halifax Clarity card review, covering interest rates, fees, limits and how the credit card works abroad.
Learn everything you need to know about the Zopa Bank credit card, including fees, features, interest rates and more.