The Basisrente, commonly referred to as “Rüruprente,” is a form of private pension insurance designed to support retirement planning in Germany. Named after economist Bert Rürup, this insurance model was introduced in 2005 as an alternative to the conventional state pension systems.
Rüruprente aims to provide a stable income during retirement years, and it is particularly attractive for freelancers, self-employed individuals, and higher-earning employees. It serves as a supplement to the public pension scheme and offers tax advantages that become increasingly beneficial as you approach retirement.
The Basisrente is often divided into two categories: traditional Basisrente, where contributions are invested in secure assets like bonds, and funds-based Basisrente, which involves investing in a variety of assets such as stocks, bonds, or real estate.
One of the primary advantages of the Basisrente is the tax benefit. Contributions to Rüruprente plans are tax-deductible, up to around 25.000€/year for a single and twice as much for married people, which can be significant for high-income earners.
For example, imagine paying 10.000€/year into such a plan and your income tax is 35%. This means that once you file your taxes the following year, your taxes will be reduced by 3.500€, leaving you with a net payment of 7.500€ for a 10.000€ investment.
Furthermore, as this is a long-term investment, it provides the assurance of a steady income in the retirement years.
Many Basisrente policies also come with optional add ons like disability protection, thereby adding an extra layer of security. However, it’s crucial to think about what you want to achieve with this product and usually only go for the actual purpose of saving money for your retirement.
Traditional Basisrente:
Coverage: Focuses on providing a guaranteed income during retirement. Investments are generally conservative, geared towards bonds and low-risk assets.
What’s not covered: The Basisrente typically does not offer the flexibility to withdraw the money before retirement without penalties.
Fund-based Basisrente:
Coverage: A more flexible plan allowing a mix of investments. Potential for higher returns but accompanied by higher risks.
What’s not covered: Fluctuating markets mean that your funds are less stable than the traditional option during the savings period.
The Basisrente is most advantageous for self-employed individuals, freelancers, and high-income earners who are looking to enhance their retirement savings while benefiting from tax deductions. It’s also a viable option for those who are not covered by employer-based retirement schemes.
€25,787
The maximum annual contribution to a Basisrente that could be claimed as a tax deduction in 2022 (Double for married couples).
