Saving retirement funds through new plans that reduce internet costs
In the current economic landscape, many in Germany are expressing concerns over the proposed increases in pension contributions. The Traffic Light Coalition's plans, if implemented, may ask employees to shoulder the consequences of recent years' financial missteps.
However, individuals in Germany still have the power to manage their retirement provision, mitigating the impact of increased contributions to the state pension system. Here are some strategies:
- Private Pension Plans (e.g., Rürup Pension): Particularly beneficial for the self-employed and freelancers, these plans allow unlimited contributions up to a maximum tax-deductible amount (€29,344 in 2025). They offer tax advantages and potentially better returns through fund-linked investments. By building private retirement savings outside the state system, individuals can reduce their reliance on state pensions, which face rising contribution rates.
- Company Pension Schemes: Employees have the right to divert part of their gross salary into a company pension plan. Contributions up to €644 per month in 2025 are tax-free, with employers adding at least 15% to employee contributions, enhancing retirement savings. This deferred compensation reduces taxable income and supplements state pension benefits.
- Investment in ETFs or Real Estate: Supplementing pension contracts with long-term ETF savings plans or real estate investment can provide additional private retirement security. Although riskier, these options can grow wealth independently of pension system fluctuations.
- Self-employment and Private Health Insurance: Since self-employed individuals are generally exempt from mandatory social security contributions, they can focus on private retirement provisions, easing exposure to increased state pension contributions.
By diversifying their retirement savings, individuals can reduce dependency on the statutory pension system and avoid the financial burden of increased pension contribution rates. It is recommended to combine at least one pension plan with investment strategies suited to personal risk tolerance and retirement goals.
Despite these options, it is important to note that rising pension contributions continue to apply on employment income up to €96,600 annually, split equally between employer and employee. By 2035, contributions to the pension insurance will increase to 22.3%.
The current pension level in Germany is already insufficient for many people, with the average pension at only 1,543 euros, below the average living costs of a single household in Germany. The pension system is facing an unsustainable situation, with annual expenditures from tax revenues reaching triple-digit billions.
The Traffic Light Coalition plans to present new plans for old-age provision to address these issues. If the current law is passed, employees will receive less net from gross starting in 2028. However, by understanding and utilising the strategies outlined above, individuals can take control of their retirement provision and secure a more comfortable future.
- In the face of the Traffic Light Coalition's plans, which may increase the financial burden on employees due to the consequences of recent years' financial missteps in business and politics, individuals in Germany can opt for private pension plans like the Rürup Pension to build personal retirement savings outside the state system, reducing their reliance on the general-news topic of increasing contribution rates in the pension system.
- As the proposed plans by the Traffic Light Coalition may impact employees' net income starting in 2028, it is crucial to have a combination of at least one pension plan, such as company pension schemes, and investment strategies tailored to individual risk tolerance and retirement goals, like investment in ETFs or real estate, to secure a more comfortable future and counteract the economic landscape that is its focus on increased contribution rates in politics and business.
