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‘Too sick to work’ teacher rakes in Swiss cash

A German teacher who went into early retirement on a state pension after he was classified as too sick to work was found to be earning €9,900 a month in Switzerland. A court this week handed him a €20,000 fine for pension fraud.

Published: 19 December 2012 11:53 CET
'Too sick to work' teacher rakes in Swiss cash
Photo: DPA

The 61-year-old Martin B. taught economics and social studies at the Theodor Heuss vocational business school in Wetzlar, Hesse, until 1997. After he fell out with the school directors, he reported himself sick and retired aged 46, the Bild newspaper reported on Wednesday.

But unbeknownst to German authorities, the teacher took up a post at a private business school in Bern, Switzerland in 2001, where he taught law for a monthly pre-tax salary of 12,000 Swiss francs, or €9,900.

Bild reported that he continued to take a state pension benefits up to €2,000 a month until 2004, when the Hesse state learned of his lucrative Swiss job.

Despite this, he continued to claim his private occupational disability insurance of €988 a month, even though a Federal Administrative Court ruled he was fit to work in 2010.

The court confirmed an earlier verdict, sentencing Martin B. to a suspended sentence of one year and a €20,000 fine. He remained silent throughout the case, but his lawyer said his client intends to appeal to a higher regional court.

He has since been sacked without notice by the Bern school, and faces a claim for €90,000 from his private insurer. But he does have something to fall back on – he is entitled to €4,000 a month of Swiss unemployment benefit for up to two and a half years.

The Local/bk

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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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