German retirement provision rests on five pillars that differ widely in subsidies, flexibility and tax effect. Find the right mix and you leverage every euro contributed by a factor of 1.5–2; without a plan you leave thousands of euros of subsidy untapped each year. Our retirement provision calculator shows your gap and the mix that closes it in seconds.

The pension gap: foundation of the plan

The pension gap is the difference between your retirement need (target pension) and your projected statutory pension. Rule of thumb: ≈ 80 % of your last net income. The missing 20 % look small at first glance but compound over 20–30 years of retirement.

Example: Anna earns €3,000 net, so her target pension is around €2,400. Her pension-points projection yields €1,500 GRV — the gap is €900/month. Across 25 years of retirement that's €270,000 to bridge with the other pillars.

Pillar 1 — Statutory Pension (GRV)

The GRV is mandatory for employees and certain self-employed groups. Contribution: 18.6 % of gross (split equally), with the assessment ceiling at €96,600/year (West, 2026). Current pension value: €39.32 per Entgeltpunkt. 45 years at average pay yields 45 EP × €39.32 = €1,769/month.

Tax: contributions are partly deductible (96 % in 2026) as special expenses; payouts are fully taxable (deferred taxation). Despite criticism, the GRV remains the backbone — uniquely hedged against inflation and longevity.

Pillar 2 — Company Pension (bAV)

bAV under §3 Nr. 63 EStG is the strongest leverage pillar for most employees:

  • Tax-free: up to 8 % of BBG-RV — 2026 = €7,728/year (€644/month)
  • SV-free: up to 4 % of BBG-RV — 2026 = €3,864/year (€322/month)
  • Mandatory 15 % employer pass-through under §1a Abs. 1a BetrAVG (since 2022 for all contracts)

Contributing €200/month often costs only €100–€110 net once tax and SV savings hit; the employer adds another €30/month. Deep dive: company pension guide and bAV calculator.

Pillar 3 — Riester Pension

Riester rewards families with children. 2026 subsidies:

  • Base subsidy: €175/year
  • Child subsidy: €300/year per child (for children born after 2008)
  • Tax deduction: up to €2,100/year (incl. subsidies)

A family with two children born after 2008 receives €775/year in subsidies alone. Despite criticism of legacy contract costs, Riester still pays — provided you choose a low-cost contract (ideally fund-linked). Try the Riester calculator.

Pillar 4 — Rürup (Basisrente)

Rürup (§10 Abs. 1 Nr. 2 EStG) suits the self-employed and high earners:

  • Contributions up to €29,343/year (single 2026) or €58,686 (married) are 100 % deductible
  • At a 42 % top rate this means up to €12,300/year tax saving
  • Payout: lifetime annuity only (no lump sum), inheritance only to spouse

Trade-off: maximum tax leverage on entry, inflexible in retirement. Calculate with the Rürup calculator.

Pillar 5 — ETF Savings Plan

ETFs are the most flexible pillar: no subsidy, but no lock-in either:

  • Available any time
  • Savers' allowance €1,000/year (€2,000 married) on capital gains
  • 30 % partial exemption on equity-ETFs in payout
  • Inheritable, transferable, combinable with anything

A broadly diversified solution (MSCI World or All-Country) is usually enough; long-term real returns of 4–6 % p.a. are realistic. Try the savings plan calculator or check your Coast-FIRE marker with the Coast-FIRE calculator.

Optimal mix: tax leverage first

A sensible order on a limited budget:

  1. Max out bAV up to the employer pass-through (instant 15 % subsidy = guaranteed return)
  2. Riester at least to the subsidy maximum (4 % of gross) if you have children
  3. Rürup for the self-employed or high marginal rates (tax leverage)
  4. ETF savings plan for flexibility and long-term performance
  5. Keep emergency fund separate — see emergency fund calculator

Worked example: Anna, 35, single, €4,000 gross

Anna wants to retire at 67. GRV projection €1,500/month, target €2,400 → gap €900/month. 32 years to retirement, 5 % expected return.

  • bAV: €100/month (€1,200/year) → strong tax + SV subsidy, ≈ €350 monthly pension
  • Riester: €175/month (minimum) → €175 base subsidy, ≈ €250 monthly pension
  • ETF: €200/month → ≈ €175,000 capital, ≈ €880 monthly pension over 20 years

Anna contributes €475/month, saves around €1,800/year in tax. Gap closed, with a buffer for inflation.

Common mistakes

  • Throwing away the employer pass-through: no bAV = 15 % left on the table — over 30 years that's a fortune.
  • Over-investing in Riester without children: the leverage is smaller — a low-cost ETF often wins.
  • Single-pillar concentration: all-Rürup means no liquidity in retirement for one-offs (car, travel, care).
  • Ignoring inflation: €2,400 target in 30 years is closer to €1,500 today. Plan in real terms.
  • Comparing only returns: subsidies beat returns. A bAV at 2 % guaranteed plus 30 % tax plus 15 % employer pass-through usually beats a 6 %-net ETF.

Implementation tips

  • Request your annual Renteninformation for an official GRV projection.
  • Ask your employer about bAV terms — many pay 50 % or 100 % voluntary pass-through.
  • Review contracts every 3–5 years — switching tariffs can save hundreds of euros in costs.
  • Plan for inflation — see inflation calculator.
  • Track the gap continuously — see retirement gap calculator.

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