In this expert article, you can find out, among other things, how the basic pension / Rürup pension works, whether it is worthwhile and which points you have to pay attention to when you close. Tax benefits, taxation in the retirement phase and frequently asked questions. This ultimate guide leaves no questions unanswered! After reading it, you will know all the information you should know about the basic pension or Rürup pension.

Find out all information easily in the video!

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 .

Tax deductibility

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.

Downstream taxation

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.

Who can take out a Rürup pension / basic pension?

It is often a relatively complex attempt to explain who can take out a basic pension. It is very simple: Everyone . Everyone who has his statutory pension ( e.g. employees ) want to supplement, can take out a basic pension. Just as well Self-employed who do not pay into the statutory pension insurance. The basic pension was originally introduced for the self-employed. But because of the advantages of the basic pension and the further decreasing pension level of the statutory pension insurance, the basic pension is also very interesting for many other people. Also Officer can take out a basic pension.

“The basic pension is increasingly worthwhile and for many people with higher incomes it is a lucrative instrument for building up old-age provision.”

Prof. Michael Hauer, Managing Director of the Institute for Pension Provision and Financial Planning GmbH

Advantages of the Rürup / basic pension

Let’s take a look at the real advantages of the Rürup pension. These can certainly be seen.

High tax deductibility of the contributions

Certainly one of the greatest advantages of the basic pension is that the contributions are tax deductible. And many times more than, for example, with the Riester pension (mac.2,100 € / year) is the case. Currently (2020) 90% of the contributions can be deducted from tax. A maximum of € 25,046 pa per person in 2020.

Lifetime annuity payments

The Rürup pension guarantees you lifelong pension payments. No matter how old you get. So just like the statutory pension insurance. This completely safeguards the risk of longevity. You don’t have to worry about running out of money at some point. Even if practically all of the capital in your Rürup contract has been used up, the insurer will continue to pay you the agreed pension.

“Compulsory saving” for your future self

Hand on heart: How secure is your retirement provision when you know that you can access your contract at any time and make payments or cancel it completely? It is no secret that in Germany we not only postpone old-age provision, we simply do not go through with it. And this is exactly where the basic pension helps by not tempting you to withdraw money in advance from the contract. The basic pension protects your future “you” from the possibly very “stupid” decisions of today’s “you”. This advantage – which is often interpreted as a disadvantage (“inflexible”) is for me – besides the tax advantage – the most important reason that speaks for the basic pension. It protects you from yourself.

Diverse investment options

You can invest very flexibly with your Rürup pension. Whether 100% in ETFs or actively managed funds. With or without a premium guarantee. Everything possible. You could even invest in the classic and purely fixed-income way. Although this is not recommended with a current discount rate (2020) of 0.9%, you would at least have the option.

Flexible contribution and one-off payments

You can also flexibly determine your contribution and change it up or down at any time. One-off payments are also possible, e.g. at the end of the year, in order to reduce your tax burden. This is often done in consultation with the tax advisor.

Insolvency and seizure-proof

Basic pensions / Rürup pensions are subject to seizure protection, but certain requirements must be met. These are regulated in the provisions of the Code of Civil Procedure (ZPO), which also apply to insolvency proceedings.

Claims from a basic pension cannot be attached (and therefore not accessible to the insolvency administrator) if

  • a lifelong monthly payment from retirement age has been agreed
  • there is no power of disposal in relation to the contract
  • there is no entitlement to purchase from a third party
  • and there is no early termination option

This is also the case with most of the certified basic pension products available, but sometimes only partially. The Federal Court of Justice dealt with this issue in a ruling of November 16, 2017 (file number IX ZR 21/17) and stipulated that in the event of insolvency, contracts can be non-attachable, even if early termination is possible.

Hartz IV sure

In addition, the basic pension is also safe Hartz IV. In addition to the Riester pension, the company pension scheme and pension insurance with exclusion of exploitation up to retirement age, the basic pension is also protected from Hartz IV. Thus, this is not considered an asset that would have to be sold in need in order to get Hartz IV at all.

Disadvantages of the Rürup / basic pension

Where there are advantages, there are usually disadvantages that need to be highlighted. However, it depends very much on your individual goals and plans. In the end, they will decide whether the basic pension has more advantages or disadvantages for you.

Would you like to be as flexible as possible with your retirement provision and access to the capital at any time and later have the freedom to choose whether you want a lifelong pension payment or the capital paid out all at once? Then the basic pension is not really the right product for you. Here would be more likely a private unit-linked pension insurance recommend.

Sometimes high costs

As is so often the case with insurance companies, with the Rürup pension you have to look carefully at which provider you choose. Providers with too high costs destroy returns and you end up receiving less pension than with a provider with low costs.

No termination of the contract possible

A basic pension / Rürup pension cannot be terminated early. Only a complete exemption from contributions is possible.

Survivor protection not agreed by default

The insurance conditions for a basic pension state that in the event of the death of the insured person, no benefits will be paid to surviving dependents. That is of course stupid, because all contributions paid up to then would have been in vain. However, this disadvantage of the Rürup pension can be remedied relatively easily by agreeing on survivor protection.

This is offered by almost every insurance company for the basic pension. For example, it can be agreed that in the event of death during the savings phase, the surviving dependents will at least receive the contributions paid back up to that point.

The tax advantage of the Rürup pension / basic pension

Let’s now take a closer look at the exact tax treatment of the basic pension. How exactly do the tax advantages arise and how high are they?

Unlike the Riester pension, which has allowances and tax advantages, the basic pension is purely the tax advantages that exist for the saver. However, these are a lot higher.

Calculation of the maximum deductible contribution

The maximum deductible amount that can be applied for tax purposes is calculated from the contribution assessment ceiling (BBG) for the miners’ pension insurance. This changes every year. If you then multiply the respective income threshold by the associated contribution rate, the result is the maximum amount that can be assessed for tax purposes.

2020 is the Assessment ceiling (west) 101,400 euros .

Of the Contribution rate is 24.7% .

This results in the maximum deductible amount of 25,046 euros in 2020 .

Actually deductible portion of pension expenses

In the case of the basic pension, it was stipulated that the deductible annual pension expenses increase on a percentage basis each year until 100% of the contributions can be deducted in 2025. According to the table, 90% of pension expenses can be deducted in 2020. The deductible pension expenses increase by 2% every year.

It should be noted that the contributions to the statutory pension insurance are also included in the pension expenses and thus the maximum deductible amount is reduced for employees, for example. Two sample calculations – one for a self-employed person and one for an employee – should make this clearer:

Sample calculation for self-employed

Contribution to the Rürup pension (2020): 12,000 euros (12 x 1,000 euros)

Maximum amount for pension expenses (2020): 25,046 euros

90% (2020) of 12,000 euros: 10,800 euros

>> In 2020, 10,800 euros can be deducted from tax

Sample calculation for employee

Employee contribution to statutory pension insurance (year): € 7,500

Employer’s contribution to statutory pension insurance (year): € 7,500

Contribution to the Rürup pension (2020): 6,000 euros (12 x 500 euros)

Total: 7,500 euros + 7,500 euros + 6,000 euros = 21,000 euros

Maximum amount for pension expenses (2020): 25,046 euros

90% (2020) of 21,000 euros: 18,900 euros

Less tax-free AG share € 7,500 = € 11,400

>> 11,400 euros can be deducted from tax in 2020

Taxes in the retirement phase

As already learned, a large part of the contributions in the savings phase is tax-free. In the retirement phase, however, the payments are then taxed. As with many other products. The advantage is that your tax burden will be considerably higher during the contribution period than in the retirement phase. This results in the tax advantage for you.

The first year of drawing a pension is decisive

The basic pension is taxed according to the so-called cohort principle. This means that the tax-free portion of the pension is fixed at the beginning of the pension (in euros) and applies for life. The later you retire, the higher the percentage of your basic pension that has to be taxed. From the year 2040, all basic pensions are 100% taxable.

In 2020 the tax rate is 80%. This increases by 1% every year until the full 100% is reached in 2040. So if you retire in 2035, the taxable part of your basic pension will be 95%. This 95% (or the calculated value in euros at the start of retirement) then applies for life and does not increase further every year.

Your personal tax rate is relevant

The taxable part of your Rürup pension is then taxed at your personal tax rate.

For whom is a Rürup pension / basic pension worthwhile?

As is so often the case here, too, it depends very much on your individual wishes, plans and views whether a basic pension / Rürup pension is worthwhile for you. If some of the advantages mentioned can be combined for you, then the basic pension / Rürup pension is definitely a useful component in your retirement provision.

But there are also a few basic “groups of people” for whom a basic pension would make sense or is worthwhile.

Self-employed

The self-employed and entrepreneurs who do not want to pay into the statutory pension insurance under any circumstances are very well positioned with the basic pension. There you can choose for yourself how and where the dearly earned money should be invested and you actively pursue retirement provision for yourself and don’t have to hope that in the end there will be a piece of the pie left over from the statutory pension insurance. The perfect, funded private retirement plan that will also be recognized should the self-employed pension insurance come. You can then let yourself be freed from this.

High earners

Employees who earn very well (approx. 60,000 euros or more) can benefit from the high tax deductibility and top up their statutory pension extremely cleverly with a basic pension. Since it is also possible to invest in ETFs at low cost, it is possible to build up a high-yield pension. Seizure and Harzt IV secure.

Increase in the pension for the spouse

It can also make perfect sense to take out a basic pension for the spouse, even if the spouse is not a high earner. Women in particular often lack adequate retirement provisions due to maternity leave, parental leave, bringing up their children, etc. A basic pension can be taken out for the wife in order to top up the mostly meager retirement provision and at the same time benefit from tax advantages as a married couple.

Where should you take out a Rürup pension / basic pension?

As you have now learned, the Rürup pension is not an extremely complex product per se, but here too there are some pitfalls that you can stumble upon. Starting with high costs or a pension factor that is too low and not guaranteed, to a financially weak insurer.

All of these points – and a few more – must be taken into account when taking out a basic pension.

This is why this product cannot be completed with just a few clicks on the Internet. This is not a problem with a car insurance. But your “future existence” definitely deserves more than a few quick clicks on the internet.

So it is advisable to look for a competent insurance broker who you trust and who works the way you imagine. Here, advice is usually free of charge – at least that’s how it is with us.

Should you still be looking for one Rürup pension experts then you are very welcome to be one free online advice book with us (if there are currently available dates).

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