European Pension Comparison: Germany

Recently an article published in EWN highlighted the huge discrepancy between the average state pension in the UK compared to the Spanish equivalent. But how do they compare to other countries within Europe? Today EWN looks at Germany.

The state pension system in Germany is a crucial component of the country’s social security network, providing financial support to individuals in their retirement years. Understanding this system can be complex, but here’s a simplified breakdown.

In 2020, the Global Retirement Index ranked the German pension system at number 10. In Germany, eligibility for a state pension depends on fulfilling a minimum insurance period, which varies according to the type of pension. These periods can range from 5 to 45 years, measured by pension-relevant periods like contributions paid, advises Deutsche Rentenversicherung.

The assessment of these qualifying periods is conducted in months, with each calendar month counting as a complete month, even if only part of the month includes pension-relevant contributions​​.

Retirement Age In Germany

The retirement age in Germany is currently 65 years and 10 months for both men and women. This age has been gradually increasing and is expected to rise to 67 years by 2031. The increase in retirement age is a response to demographic changes and aims to ensure the sustainability of the pension system.

For those born before 1947, the regular pension age begins at 66, but for those born in 1947 or later, it increases incrementally from 65 years and one month up to 67 years​​​​.

Average Pension Amounts In Germany

The average state pension in Germany varies based on marital status and gender. According to wise.com, a married couple, the average pension is approximately €2,907 per month. Single male pensioners receive about €1,875, while single female pensioners get around €1,617 per month​​.

Germany’s Unique Policies

German state pension system includes several unique policies. The government sponsors private pension plans with tax benefits to alleviate the load on the state pension system. These include the company pension (Betriebliche Altersvorsorge), mandatory for employers to offer, and optional for employees to accept, writes simplgermeny.com.

This plan is co-sponsored by both the government and employers, offering tax benefits and additional funds. The Riester pension targets low-income employees and families, offering state-sponsored allowances and bonuses. Another plan, the Rürup pension, originally for freelancers and self-employed, allows for 100 per cent tax-deductible contributions.

Additionally, if you leave Germany but have contributed to the pension system for at least five years, you are still entitled to your pension. The process is streamlined within Europe and facilitated outside Europe through mutual social security agreements​​.