Private pension

In 1950, only 25 percent of employees in nonagricultural field were anticipated in some private pension system.

[1][2][3] At the start of the 2000s, governments of developed countries reduced the amount of money for providing pension security.

Most of these private pension types invest in the financial markets, which brings some risks and uncertainty.

For example, it can be the time difference between the date of conclusion of the contract and income stream in the future or very low rate of return if the pension manager decided to invest into low-risk savings products.

Each participant chooses some mutual funds, stocks, or other securities to invest this amount of money.

A monthly benefit depends on the number of years worked, salary at the time of retirement, and accrual rate.

[11] These plans are offered by insurance firms and are subject to approval by the German Pension Authority.

These plans are flexible in investment strategy as long as they meet the expectations set by the government to receive beneficial tax treatment.

[13] Riester Rente is designated for low-income earners and families who pay German income and wage taxes, employees who contribute to Public Retirement Insurance, civil servants, and more.

In order to gain maximal government support, the participant is required to paid at least 4% of his/her annual income.

It must be held at least 12 years and be paid out after the age of 62 in order to claim the tax benefits on the payout.

The money can be withdrawn anytime before the age of 62 but will incur full capital gains taxation if done so.

The maximum amount saved in a year horizon is 5,149 euros in total of employer's and employee's contributions.

Contributions made by employees subject to income tax, but return of investment and retirement benefits not.

[14] PERP is form of individual pension contributions which provides additional income in a retirement.

Participating in PERP has also a tax benefit, because amount of money deposit to this scheme is tax-deductible up to 10% of your last year income.