How does the Rürup pension / basic pension work?
The Rürup pension was introduced in 2005 as a basic pension for the self-employed. Quasi as a “replacement” for the statutory pension insurance, into which many self-employed do not pay. It was named after Bert Rürup, similar to how the Riester pension owes its name to Walter Riester. However, the Rürup pension is also often referred to as the basic pension, as it has the character of the basic pension – like the statutory pension insurance.
In the 1st tier of retirement provision
In our 3-tier pension system, the basic pension is in the 1st tier. There you will also find the already mentioned statutory pension insurance, professional pension funds and agricultural pension funds. This also makes it clear relatively quickly that the basic pension should really represent a basic provision, especially for the self-employed. Or in other words: this form of old-age provision is an absolutely sensible basis for the self-employed. Especially with a view to the coming Compulsory pension insurance for the self-employed .
Contributions to the basic pension can to a certain extent be deducted from tax as pension expenses. The subject of tax advantages for the Rürup pension is discussed in detail further below in the text.
Classic or unit-linked
A basic pension / Rürup pension can either be concluded in the classic way, i.e. fixed-interest or unit-linked. As a rule, the unit-linked variant is always recommended. A unit-linked basic pension can be taken out with or without a guarantee. But more on that later.
Lifetime annuity payments
A Rürup pension pays you – like all other private pension insurances – a lifelong pension. The specialty of the Rürup pension is that the product was designed precisely for this. The basic pension is intended to ensure a lifelong, monthly financial provision at retirement age. And nothing else. Therefore, it is not possible, for example, to withdraw capital or to terminate the contract prematurely. Because none of this is possible with the statutory pension insurance and the basic pension must function as a replacement for the statutory pension insurance for the self-employed. This is often described as a disadvantage, but it is actually one of the most important features of the Rürup pension.
Tax advantages in the savings phase mean a subsequent taxation of the basic pension. The pension payments are therefore taxed later when the pension is drawn. Since your tax rate as an employed person will probably be a lot higher than your tax rate as a pensioner, this should lead to tax advantages for you and most other basic pension savers.