Premium-Aided Pension Savings Schemes

Prämienbegünstigte Zukunftsvorsorge

Coverage

Voluntary participation

All persons not yet receiving a statutory old age pension; typically no minimum age required.

Financing

General finances

Fully funded personal pension plans based on contribution payments (incl. state allowances under certain conditions) and capital revenues.

Contribution payments

Insured persons provide contribution payments and decide upon its amount individually.

State support

State subsidies of currently 4.25% (max. 6.75%) of contributions paid (up to a fixed maximum; currently approximately EUR 3,000/year); only certified pension plans are subject to state subsidies.¹
Tax exemptions for contributions.

Administration

Pension plan providers (banks, insurance companies, or investment funds) manage the pension funds and pay benefits directly to the person.
Insurance companies monitored by the ‘Financial Market Authority’ (Finanzmarktaufsicht).

Qualifying Conditions

Depends on contract; typical eligibility age is between 60 and 65.
Possibility of transfer to other institutions after contribution period of at least 10 years.

Benefits

Pension payments

Accumulated capital through contribution payments (incl. state allowances) and investment yields, minus administrative costs and costs/fees of pension provider.
Life-long annuity paid monthly (using unisex mortality tables); partly options for one-time lump sum payment (but partial loss of state subsidies and subsequent taxation advantages).
Guarantee that there are no losses in nominal amounts of paid contributions (mandatory for state support).

Taxation and social security contributions on pension payments

Pension payments are tax-exempted if conditions for state support are met.
Pension payments are not subject to social security contributions.

Coverage

Financing

Administration

Qualifying Conditions

Benefits

Voluntary participation

All persons not yet receiving a statutory old age pension; typically no minimum age required.

General finances

Fully funded personal pension plans based on contribution payments (incl. state allowances under certain conditions) and capital revenues.

Contribution payments

Insured persons provide contribution payments and decide upon its amount individually.

State support

State subsidies of currently 4.25% (max. 6.75%) of contributions paid (up to a fixed maximum; currently approximately EUR 3,000/year); only certified pension plans are subject to state subsidies.¹
Tax exemptions for contributions.

Pension plan providers (banks, insurance companies, or investment funds) manage the pension funds and pay benefits directly to the person.
Insurance companies monitored by the ‘Financial Market Authority’ (Finanzmarktaufsicht).

Depends on contract; typical eligibility age is between 60 and 65.
Possibility of transfer to other institutions after contribution period of at least 10 years.

Pension payments

Accumulated capital through contribution payments (incl. state allowances) and investment yields, minus administrative costs and costs/fees of pension provider.
Life-long annuity paid monthly (using unisex mortality tables); partly options for one-time lump sum payment (but partial loss of state subsidies and subsequent taxation advantages).
Guarantee that there are no losses in nominal amounts of paid contributions (mandatory for state support).

Taxation and social security contributions on pension payments

Pension payments are tax-exempted if conditions for state support are met.
Pension payments are not subject to social security contributions.

¹ Requirements for state subsidies: such as special requirements for investment (certain percentage of shares); companies have to guarantee that sum of invested capital contribution payments (plus state allowances) is available at beginning of payout phase; binding of the paid-up capital for at least 10 years; life-long annuity paid monthly; state subsidies capped at a maximum amount; persons are entitled to change the level of contributions or suspend account for fixed-time period; possibility of transfer to other institutions after 10 years; at this time it is also possible to request premature lump-sum payment (but partial loss of state subsidies and subsequent taxation in this case).

Legal Basis: Income Tax Act (Einkommensteuergesetz 1988); Insurance Contracts Act (Versicherungsvertragsgesetz); Insurance Supervision Act (Versicherungsaufsichtsgesetz 2016).