Private pension insurance – retirement provision with maximum flexibility

Retirement can hardly be avoided

It is surely no news for you: the legal pension is not enough! On average, current pensioners do not receive 800 euros per month. Women are generally even worse off here – due to child-rearing periods and a higher rate of part-time work. Only rarely do they receive more than 500 euros per month. In the best possible case, you can count on a maximum of 60 to 65% of your current net income as things stand today. However, this best case assumes that you are spared periods of unemployment, prolonged illness, parental leave, care time for relatives, …

Furthermore, you may not experience any downward fluctuations in income – and until 67. You will probably also have to work before you reach the age of 65. If you do not meet these conditions, you must prove at least 45 years of insurance (usually years of work), so that early retirement is not penalized with pension reductions. Who can take all these hurdles in the present time? Neither with the academics nor with the workers one will find this as a rule. The figure that is forecast in the annual pension information is therefore based on conditions that can no longer be taken for granted. The reality in old age must therefore be estimated somewhat more leanly – if only so that you have a certain planning security for your retirement.

However, the pension information draws your attention to a very important point:

Amount of your future standard retirement pension:

Your pension entitlement achieved to date would correspond to a monthly pension of:
if contributions are paid up to the start of retirement as in the average of the last five calendar years, you would receive a monthly pension of without taking pension adjustments into account:

This is how you will find it word for word at the end of the first page of any pension information sent to millions of citizens every year. The state itself is already telling you to save for retirement. The state itself warns that pensions will be even lower in the future. One experiences such openness on the part of the policy actually only in times of crisis – and with view of the pension we are also already for years in such a one.
At its core, our public pension works like this: many contributors pay in today so that – also today – the pension of retirees can be paid from it. Reserves, which may be. Even grow "on their own" through investment, are not even provided for in our pension system. What goes in, goes out again immediately.

The system was introduced during the reign of chancellor bismarck, i.E. At a time when many children were born and retirement lasted only a few years "thanks to lower life expectancy". For several decades, the functionality of this system has been limping along, mainly for these reasons:

  • Widespread low-wage jobs, broken employment histories, and late retirement lead to low pensions for many insureds
  • Constantly increasing life expectancy (from 1980 to 2014 alone, this increased by a whole five years)!)
  • Permanently low birth rate (resulting in fewer young people, which also steadily increases the proportion of old people in the total population)

The system is held by means of massive subsidy from tax money alive. This will probably remain the case for the time being, since no government is likely to take on the feat of changing the system. In any case, the fact remains: if you want to enjoy at least today's quality of life in retirement, you have to save for old age yourself.

Saving for old age – but how?

In the first step it does not matter how you save for old age. Savings account, call money account, fund savings plan, pension insurance..

The main thing is to build up a capital stock for old age, from which you can supplement the modest pension, so that it is sufficient for everyday life. If you take a closer look at the various forms of savings in the second step, you will notice two clear differences:

For both points there are differences with an enormous impact for you. For the sake of simplicity, we would like to refer in the following to each form of banking product (z. B. Savings book, fund savings plan) only speak of the savings plan, since the conditions are always identical, regardless of the actual product.

The tax treatment – a small "tax gift" from the state

The legislator directly and very strongly promotes individual forms of old-age saving (riester and basic pensions as well as occupational pension schemes), which is not the case with classic forms of saving and capital investments. But even with the flexible private pension, he wants to reward a sound provision for retirement. For the taxation of lifelong pensions, only a taxable portion, the so-called. Share of income. This is only 17% at age 67, for example. Thus, a large part of the pension remains tax-free. Even with an assumed top tax rate of 42% (in practice, however, the values are rarely much higher than 30%), a maximum of 7.14 EUR would have to be paid out of a monthly pension of 100 EUR. Decide after a mind. 12-year term for a lump-sum payout from the age of 62. If you save for retirement before you reach the age of 65, only half of the income is taxable (so-called "tax-free" income). Half-income procedure).

Our example below is intended to show the impact this has on the capital that is really available to you from a savings plan and, alternatively, from a private pension insurance policy in retirement (lump-sum settlement). In the case of capital payments from fund pension policies of the 3. Layer for new closures resp. New contract parts from 01.01.In 2018, an additional flat-rate partial exemption of 15% applies. The portion to be taxed at the personal tax rate is then only 42.5% of the income (50% of 85%). Thus, even with an assumed top tax rate of 42%, there are only 17.85% in actual taxes to be paid.

Is retirement provision therefore an insurance issue?

If pensions or savings are not enough, the pensioner will have to rely on a private pension. Existing assets or real estate. If this still does not cover the costs incurred, the relatives are obliged to pay (§ 1601 BGB). With an average care duration of 6 years, additional payments of more than 100 euros can easily result.000 €. It is therefore everyone's responsibility to make provisions in good time for the "worst case scenario" so that adequate care is ensured.

Besides, who wants to be on the backs of their own children later on??

Life-long (pension) gap closing pleases?

The second difference we can see is in the annuitization. Since the statutory retirement pension leaves you with a monthly income gap that will be present for the rest of your life, it also makes sense to have the retirement assets of a pension contract paid out monthly as well. A life annuity is the perfect solution.

However, only and exclusively a pension insurance can offer you such a coverage. Only here you acquire with your retirement savings also the insurance protection of a guaranteed, lifelong pension – no matter how old you become, the pension insurance will pay.

And if you die early? Even then, depending on the provider and tariff, the annuity insurance offers various options for surviving dependents. The remaining contract assets remain with your surviving dependents.

A withdrawal plan can be presented like a savings plan – only the other way round. In order to be able to calculate this, however, it must always be determined before the start of its monthly payments, over how many years it is to run. The problem is obvious: if you live for another 30 years after retirement and not just 25, the "supplementary pension" for the last five years will simply be cancelled because the capital stock has been used up. Since it is precisely in these last years of life that the widespread problem of the need for long-term care with all its high costs arises, this can mean the financial super-GAU for you and your family.

Which type of pension insurance is right for you?

Now that we have explored the differences between the options available for saving for retirement, let's look at the differences between the various types of annuities
because the differences here are enormous. The market now offers a wide range of different approaches. In the following, however, we would like to limit ourselves to the three variants that are actually relevant to the customer's decision. In principle, almost anything is now possible. Therefore, please do not hesitate to contact us if you have any special requirements for your old-age provision. We will be happy to show you the possibilities of the market here as well. But first, here are the three most important variants:

The classic pension insurance

The classic pension insurance is – in a positive sense – the dinosaur among the variants of private pension insurance. This solution has always existed – in reality, however, long before the founding of the federal republic of germany. Your savings contributions flow into the cover pool of the chosen insurance company. Here you will receive interest at the current guaranteed rate of 0.9%. Since the insurer works with your money, it aims to generate an overall return that is higher than the guaranteed interest rate. This results in the surpluses that also flow into your contract. The average total return that an annuity contract can generate is currently approx. 3,25 % p. A.. The classic annuity insurance is subject to a relatively strict legal regulation with regard to the investments that an insurance company is allowed to make (capital investment restriction). For this reason, customer funds are primarily invested in fixed-interest securities. On a much smaller scale, also in real estate and shares. The classic pension insurance is one of the conservative and therefore very safe forms of investment. For many, it is therefore the perfect solution for retirement, even or especially because you yourself do not really know how your money is invested. But then you don't know that with your house bank either…

The fund pension insurance

Unit-linked annuities take a different approach than their endowment-based sister. Here the investment takes place in funds, which are selected by you either individually from the offer of the insurer or in preset packages (the so-called "investment funds"). "Baskets").

Fund offers with asset management character are also known here. Whoever chooses this form of retirement provision should have at least a basic understanding of the investment market (shares, fixed-interest securities). There should also be a basic optimism that the markets have a higher return potential than the industry average for endowment pensions.

Only then is this form of pension insurance suitable for you. You will not find a guaranteed interest rate, the contract balance can fluctuate up and down with the prices of the fund shares. Of course, this gives you the chance to make a great deal of your money – but it also carries the risk that a drop in the exchange rate will greatly minimize your contract balance at the start of your pension. To avoid precisely this risk, many plans now offer automatic maturity management, which gradually shifts the contract assets into fixed-income securities at the end of the term, which generally have a lower risk of price fluctuation than z. B. Stock funds. The principle remains however: you decide here yourselves, how your money is to be invested – with all consequences.

Hybrid annuity

Here is an attempt to combine "the best of both worlds". Hybrid annuities typically offer a guaranteed minimum rate of return, min. But the guaranteed maintenance of contributions. The total yield one strives however with an investment in funds. This form can be an interesting solution, especially in low-interest periods, combining security with income opportunities. Since guarantees always have to be reinsured in one way or another, the freely investable savings portion for the fund investment is smaller than in a genuine fund policy. The total return is therefore very likely to be lower. In return, the "free fall" of the investment value in bad times is slowed down by the guarantees.

A lifetime solution thanks to maximum flexibility

Let's take another look at the flexibility of private pension insurance. This flexibility is one of the main reasons why customers opt for this form of retirement provision and turn their backs on state-subsidized solutions. Private pension insurance can be adapted to almost all life situations. We would like to briefly discuss the most important possibilities that such a contract offers you.

Pension or lump-sum settlement

At the end of the term, you can decide whether to take the lifetime
would you like to have an annuity or would you prefer a one-time lump-sum payment?.
There are arguments in favor of both payment options. With the private pension insurance you have the opportunity to make the decision only when you can realistically estimate the consequences for your own provision due to age.

Deposit as collateral

Plan to make major purchases, such as. B. The purchase of a property, you will have to provide collateral for the lender. The balance of a private pension insurance policy can be pledged in full as collateral. By the way: real estate financing can usually also be handled directly through a life insurer.

Lending/ withdrawals/ early termination

Of course, over the years, you may find yourself in a financially precarious situation at one time or another. Here, too, private pension insurance does not leave you in the lurch. In principle, almost every insurer offers its customers the option of taking out a policy loan up to the amount of the credit balance (assuming creditworthiness).

Like a bank loan, you can then pay it off in agreed-upon installments without putting your retirement savings at risk. As a rule, you can also dispose of parts of the balance during the accumulation period of your contract (z. B. Through withdrawal or partial termination) or, if there is no other way, to terminate the entire policy. Please note the tax consequences.

Flexibility of the contribution/ special payments

Even the agreed monthly premium of your private pension insurance is not unchangeable. Depending on your ideas and possibilities, you can adapt it to new needs or situations. With special payments into the contract you can increase the expiration result.

As I said, these are only the most important points that speak for the flexibility of the private pension plan. We would be happy to discuss your questions in detail in a personal meeting. Let's hold on for the moment: private pension insurance is one of the most flexible retirement products around!

Last but not least: a "cherry on the cake" security

Security and age precaution should go hand in hand. On the guarantees in the amount of coverage or. We have already discussed the possibilities of survivor benefits earlier in this paper.

Here are a few more "safety features" of private annuities we'd like to highlight as we wrap up this booklet.

Additional insurance cover

If private pension insurance itself is supposed to solve your old-age poverty problem, problems may already arise along the way. As a result, depending on the provider and plan, annuities can be "loaded" with a variety of additional insurance products. Disability should be mentioned here as one of the most important protections for all segments of the population. By docking this protection to an annuity contract, either the payment contribution (if applicable. (also with dynamization) or additionally a monthly disability pension as income replacement can be secured. Some providers now also offer long-term care options that allow you to take out a private long-term care supplement without a health check when your annuity contract expires.

Protection against seizure/foreclosure

The state-subsidized forms of old-age provision are also automatically protected against seizure by creditors or liquidation in the case of hartz IV payments. Also with the private pension insurance such – at least partially – can be represented. By agreeing to a forfeiture, you assure that the contract will be used solely for retirement purposes. For each year of your life, you can secure 750 euros of contract credit from the access of third parties.

Veteran jack-of-all-trades

At the beginning of this brochure, there was still the question of why you should take out a private pension insurance. Now at the end of the brochure, the question should be, "why should I take out anything else?". You will not be able to find a better combination of security, yield, tax advantage and flexibility in the market. Private pension insurance has already helped millions of customers get through various crises unscathed. It is there for you in all circumstances and will not let you down. Therefore, we believe that private pension insurance can also be a good solution for you.

Interest aroused? Then get in touch with us – it's worth it!