for employees and self-employed

Basis or Rürup private Pension

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First things first

The Rürup pension is intended as a pension system for self-employed persons who are not allowed to contribute to the statutory pension. Nevertheless, employees can also take out a Rurup pension.

The state promotes the basic pension (Rurup) through tax benefits. From 2025, savings contributions will be tax-free up to a maximum rate. In 2022, 94% of the amounts paid in are tax-free up to the maximum rate.

The payment of the saved amount is possible only as a monthly pension. There is no one-time payment.

The amounts paid in are protected. Even in the worst case of insolvency, debtors cannot liquidate the capital from the Rurup pension.

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Rürup Pension

Patrick Oliver Ott

Expert for insurance and finance

30. March 2022

state subsidized through tax relief

Rürup private pension for self employed, freelancers and employees

The “basic pension” (named after its “inventor” Prof. Rürup and also known as the Rürup pension) is part of the 1st layer of the German pension system. Unlike the public German pension insurance (DRV), basic pension provision is not obligatory.

However, it has been set up legally very similar to the DRV. Above all, only pensions can be paid out – no pay-outs of the invested capital are possible! While this may sound like a negative parameter, it also means that the money invested into the Rürup pension is protected.

Potected mainly against yourself if you feel like doing something stupid. Or if you fall into hard times and have creditors chasing you and foreclosing on your other assets. They can’t touch the Rürup pension capital, it is always safe for you until you reach retirement. Pensions can be paid out from the age of 63. So, such an “inflexibility”, as some see it, has its pros and cons.

What is the Basis or Rurup pension for?

The Rürup pension was set up in order to allow the self-employed and freelancers a similar pension saving like in the public pension (to which they usually cannot contribute). But high-earning employees and public servants as well as people occupied in special areas like lawyers, architects and doctors can use Rürup pension plans to save extra money into their pension planning with tax subsidies.

Good to know: The basic pension (Rurup) is very interesting not only for the self-employed, but also for employees with a good income.

Self employed pension scheme

Employees have statutory pension insurance and usually make additional provision with a Riester contract and a company pension plan. For the self-employed and freelancers, these two variants of private pension provision do not exist. The Rürup pension, also known as a basic pension, is the alternative pension insurance for the self-employed.

The Rurup pension is a private pension plan that is subsidized by the state. Self-employed persons can choose between three variants:

The classic Rürup pension: When the contract is concluded, it is clear how high the pension will be. It is therefore particularly suitable for security-oriented people.
The unit-linked Rürup pension: Contributions are invested in investment funds. A fixed pension amount is only guaranteed from the start of the pension.
Rürup pension as an immediate annuity: Payment of a single premium, from which a lifelong pension is paid out immediately. This variant is only suitable shortly before the start of the pension.

Tax consideration of the payment of contributions

Tax deductibility of Rürup pension contributions

Contributions to the basic pension scheme can be deducted from tax at an annual rate (100 percent as of 2025). Currently in 2022, this is 94% of a maximum of € 25,639 for a single person and € 51,278 for married couples. This means you can currently write off 92% of your investments against your income and thus save the taxes you would have had to pay on this share of your investments.

And the percentage increases by 2 percentage points every year until you can write off 100% of your contributions in 2025. Self-employed persons can thus provide for their retirement tax-free.

Example: Assume you have a taxable income of € 90,000 as a self-employed person and pay € 20,000 per year into the Rürup pension. From the year 2025, the savings amount will be 100% tax-privileged. In this constellation, with a marginal tax rate of 42%, you have a tax saving of € 8,400 per year.

For employees, however, ongoing compulsory contributions to the DRV are deducted from the total amount. So, employees often find that they can only invest a far lower yearly amount into the Rürup pension.

Another important fact: A pensioner who retired in 2015 has to pay tax on 70 percent of his pension for life. A new pensioner in 2020 will then be subjected to a permanent rate of 80 percent. The main difference to DRV is the real capital cover. Basic pensions are saved in the form of a pension assurance. The life insurer keeps the savings contributions on a personal account in an insurance contract. Therefore they offer serious planning security for the investor as they offer guaranteed pension payouts.

Basic provision is the privately organized form of DRV. If you leave Germany before retirement, your assets will continue to be managed free of charge. It is not payable; it can only be paid out as a pension at the start of retirement.

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Tax advantage for occupational disability insurance in combined policies

Contributions to an occupational disability insurance (one of the most important forms of income protection in Germany) can usually not be deducted as expenses from your taxes.

However, if you set up a Rurup pension plan where 49% of the contributions are used for supplementary insurance, e.g. in the event of occupational disability or inability to work, the full monthly premium can be written off in your tax declaration.

This is a very attractive form of tax savings for all those who have understood that contributing to an income-protection plan is important for their financial planning and to protect their families, just like a life insurance can be. CR&Cie calculates individually in each case whether or not this has a tax and pension impact.

In Germany, high commissions usually accrue when you take out a basic pension. This will usually create a hefty financial disadvantage for you if you are staying in Germany for a limited period of time. Or in any other cases as well, due to the loss of compound interest from the commission costs deducted from your investments in the first couple of years.

For this reason, we at CR&Cie can also arrange for basic pensions to be provided on request as so-called “Netto-Plan” where there are no inherent commission costs that diminish your savings. Instead you’ll pay a reasonable direct fee to CR&Cie, which is always far lower than the commission cost you’d otherwise incur.

Rürup pension contracts can also be used for QROPS transfers if you want to transfer your British pension insurance policies to Germany. We are happy to help with this together with our British QROPS experts.