Germany’s statutory pension system (gesetzliche Rentenversicherung) deducts approximately 18.6% of gross salary (split between employer and employee). Most people working in Germany for several years will draw a German pension. Here is how the system works.
The Contribution System
Every employed person in Germany contributes to the Deutsche Rentenversicherung (DRV) — German Pension Insurance. The contribution rate in 2024 is 18.6% of gross salary, half paid by the employee (9.3%) and half by the employer (9.3%), up to the Beitragsbemessungsgrenze (contribution ceiling, €90,600/year in 2024 for western German states). The contributions are compulsory and automatic — your employer handles the deduction. You receive a Versicherungsnummer (social security/pension insurance number) when you first start working in Germany; this number tracks your entire contribution history.
The Points System
German pension entitlement is based on Entgeltpunkte (earnings points). You earn 1 point for each year you earn the national average income (€43,142 in 2024), and proportionally fewer or more for income below or above average. The pension amount is calculated as: earnings points × pension value × pension type factor. The pension value in 2024 is €39.32/point/month in western Germany. A person who works in Germany for 35 years at the average salary earns 35 points × €39.32 = €1,376/month gross pension. This is below the poverty threshold for a pension-age person in major German cities — most financial advisors recommend supplementary private pension savings (bAV or Riester Rente).
What Happens When You Leave Germany
Your contributions are not lost when you leave Germany. EU residents: the German pension periods are coordinated with the pension systems of other EU states — you receive credit in both systems. Non-EU residents with bilateral agreements: Germany has agreements with many non-EU countries (including China, USA, UK, Canada, Japan, and Australia) that recognise German pension contributions. Non-EU residents without agreements: you may apply for a refund of your personal contributions (not the employer portion) if you leave Germany and your country of origin has no agreement with Germany, subject to a 2-year waiting period after leaving. You can also leave the contributions in place and draw a partial pension at German retirement age.
Private Pension Supplements
The statutory pension alone is often insufficient for a comfortable retirement. The three supplement options: Riester Rente (government-subsidised, €175/year state grant + child bonuses, complex qualifying rules — primarily for employees covered by GRV); bAV (betriebliche Altersversorgung — company pension, employer can contribute pre-tax up to €604/year in 2024, effective tax and social contribution deferral); and private pension insurance or ETF savings plans (more flexible but no state subsidy). The standard recommendation for Germany: contribute enough to a bAV to capture any employer matching, then invest additionally in low-cost ETF savings plans.
