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More pensioners working low-paid jobs to get by

An increasing number of German pensioners are being forced to work low-paid mini-jobs or apply for special supplemental aid from the government in order to make ends meet, statistics show.

Published: 22 August 2011 09:14 CEST
More pensioners working low-paid jobs to get by
Photo: DPA

According to statistics from the Federal Ministry of Labour and Social Affairs provided to the Saarbrücker Zeitung, roughly 660,000 people between 65 and 74-years-old had to work low-paid jobs to supplement pensions in 2010, representing 3.9 percent of the population in that age group. That’s compared to 2000 when 416,000 had to work – or about 3 percent of retirees.

Pensioners applying for the social security package from the state for low-income seniors also increased – in 2009 some 400,000 applied for it compared to 258,000 in 2003, according to the newspaper.

The government has already announced an increase in the Germany’s retirement age from 65 to 67 beginning in 2012, saying the country has no alternative because society is ageing rapidly and people are living longer. Also, recent statistics show pension benefits have been rising below inflation rates, leading to a drop in the real value of payouts by seven percent in the past decades.

“Retirement was yesterday. Drudgery until death is the fate of more and more pensioners today,” said Matthias Birkwald, a Bundestag member from the socialist Left party, which made the original request for the statistics from the government.

The development appears to be the decreasing value of pension benefits as well as an increasing number of people with poor or low-paying work histories – in Germany, old-age pensions are largely driven by how much money workers earned when they were younger.

Birkwald demanded an end to anything that could lead to cut backs in pensions, to move the retirement age back to where it was and to create minimum payouts for the long-term unemployed or people who had low incomes when they worked.

The Ministry of Labour and Social Affairs said it was starting a special dialogue next year to discuss how to adjust the government-sponsored pensions to deal with the country’s changing realities.

The Local/mdm

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PENSIONS

EXPLAINED: Is it worthwhile to set up a private pension plan in Germany?

If you’re employed in Germany, you’re almost certainly contributing to your state pension. But it might not be enough to live on in your old age, meaning people often have to put other plans in place to retire comfortably. Here’s why some pick private pensions on top of their public ones.

Published: 19 February 2024 08:50 CET
Updated: 24 February 2024 14:00 CET
EXPLAINED: Is it worthwhile to set up a private pension plan in Germany?

Experts reckon that very few people who work in Germany end up drawing a net pension that will even give them the current average monthly wage – which sits at a little over €2,500 after tax. Those that do will have likely contributed the maximum amount for several years.

“For a typical foreigner, that public pension is nowhere near enough,” Chris Mulder, Co-Founder of Pensionfriend – a private pension provider catering to Germany’s expatriate community – told The Local.

Mulder says this is especially true for foreigners because most Germans who live and work their whole lives in Germany simply won’t have enough to retire on with state pension alone. Foreigners, he says, have to be even more mindful because of the “patchwork quilt” of pension entitlements they might end of collecting from around the world, which don’t necessarily all combine well to provide livable incomes later in life.

But while it might be clear to people that they’ll need more than their German state pension in retirement, why might someone want to invest in a private pension plan in Germany rather than simply investing their own money themselves – perhaps in stocks and ETFs through a depot?

Private pension funds can typically professionally invest your money for you. Photo: Unsplah / Jenny Ueberberg

Yet Mulder points out that investing by yourself through a depot will typically see you pay withholding taxes every year – and capital gains tax every time you sell.

By contrast, if you invest through a private pension plan, you’ll pay only when you take your money out – either all at once or over time – typically later in life when you hit retirement age and have less income.

In addition, if you hold the private pension plan for at least twelve years and you wait to take out your money until after you turn 62 – you’ll only be taxed on half of your capital gain. Tax benefits also increase the longer you wait to take it out.

READ ALSO: How does Germany’s retirement age compare to the rest of Europe?

What about plan costs?

Mulder says that even with the tax advantages a private pension plan comes with, some providers may charge too much in fees to make it worth it.

A good rule of thumb is to see if a potential provider’s fees are less than the withholding tax you would pay if you simply invested the money yourself.

“We work to set ours up in a way that your tax advantage outweighs our cost,” said Mulder of his own company’s offering.

READ ALSO: How long do you have to work in Germany to receive a German pension?

Can you take your pension with you out of Germany?

For state pensions, this obviously depends on where you go. You can take German state pension payments anywhere in the European Union or associated countries – meaning that retiring to the warmer climes of Spain or Italy won’t affect you pension rights. Leaving the EU might come with some limits, depending on where you go to.

Private pensions though, are much more flexible – and you can typically draw them wherever you end up relocating.

READ ALSO: EXPLAINED: Do your pension contributions abroad count in Germany?

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