Transferring your pension savings to Germany

If you’ve been saving up as part of your old-age provisions, you won’t want to leave your savings behind when moving country. How can you make sure you keep your insurance? Which German tax regulations do you need to consider? STC have all the information you need.

To read this article in German, click here.

1. Under what circumstances can I transfer my savings?

There is a framework in place that allows you to move your saved-up money from a UK insurance company to a German pension scheme. This framework exists mainly to make sure that your money is in safe hands. However, it also ensures that insurance holders don’t skip on paying the required amount of tax in either country.

The requirements you have to meet when transferring your savings are the following:

• The German insurance carrier must be registered with HMRC as a Qualifying Recognised Overseas Pension Scheme (QROPS). Click here to find a list of all German QROPS.
• Insurance carriers‘ permanent residence must be in Germany. If your German pension scheme is a Direktversicherung, your employer must also be based in Germany.
• The transferred sum must amount to at least €15,000.
• If you’re planning to transfer anything over £30,000, you are required to seek counsel with an FCA certified financial adviser. However, even if you are not transferring as much, we strongly recommend you seek counsel anyway. German insurance carriers will not be able to provide you with counsel concerning UK tax regulations. 

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2. What type of scheme can I get in Germany?

There are two types of German pension schemes that you can transfer your savings to: The Direktversicherung and the Basisrentenversicherung. Both policies allow you to transfer one fixed amount (single premium) of money as opposed to monthly or yearly contributions.

Video: What’s a company Pension Scheme? (German)

2.1 Direktversicherung with single premium

If you take out a Direktversicherung, your employer will contribute a fixed amount to an insurance fund. Usually, this amount is taken out of the employee’s monthly earnings. However, employers may choose to subsidise or even absorb the costs as a benefit to the employee.

If you want to transfer your savings from a British insurance carrier to Germany, you need to take out an entirely new insurance policy. Also, it‘s important that not only you, but also your new employer be permanently based in Germany. This means that if you want to live and work in Germany, but your employer is British, you‘ll need to look for alternative schemes.

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2.2 Basisrentenversicherung with single premium

Whilst the Direktversicherung is closed by your employer, any person can take out a Basisrentenversicherung for themselves. With this scheme, you pay your own insurance contributions and are therefore independent from your employer and your clients. This is why the Basisrentenversicherung is especially popular among freelancers and young employees.

When transferring savings to a German Basisrentenversicherung, it does not matter where your employer is based. The only requirement is that your own permanent residence is in Germany.

3. How does it work?

When you plan to transfer your savings from a British pension scheme to Germany, the German insurance company will come up with a Berechnungsvorschlag (preliminary cost proposal), taking into account how much you have already contributed and how this translates to German coverage options.

To request a Berechnungsvorschlag, contact the company pension expert for the QROPS of your choice or an insurance broker such as STC. If you like the proposal and want to take out a policy, the transfer of your savings can go ahead. For this you will need the necessary paperwork from your British insurance carrier.

Please note: According to experience, the transfer of savings from one insurance company to another will be a lot easier and faster if communication happens directly between the insurance providers. This means that you need to authorise both parties to communicate with one another – most QROPS will gladly provide you with the necessary paperwork.

4. What else should I know about?

Of course many factors can determine how exactly your savings can be transferred. The most important criteria you will find in this following section. If you have any remaining questions, please do not hesitate to contact STC – you’ll find a contact form at the bottom of this page.

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4.1 Taxation of insurance benefits in Germany

If you’ve taken out a Basisrentenversicherung scheme, all of the payments you receive will be subject to taxation. Additionally, if you are a voluntary member of the German statutory health insurance, you will need to contribute to the state sickness funds as well.

Insurance proceeds from a Direktversicherung are subject to taxation as long as they fall under § 22 Nr. 5 Satz 2 EstG. Proceeds from a Direktversicherung are also liable for contributions if you are insured under statutory health insurance.

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4.2 Any Other Business

It is strongly recommended that you ask a British financial consultant for advice before transferring your savings. They will be able to tell you exactly what kind of costs you should be expecting on your side of the channel. If you’re planning to transfer more than £30.000, using an FCA certified consulting service is mandatory.

It is also important to note that any German QROPS must inform HMRC on what you are up to: This especially applies if you get a premature payment (anything under 10 years after the transfer).

5. Contact STC for more information

Are you looking for more answers regarding QROPS, taxation in Germany, or your specific situation? Feel free to contact STC via our contact form and we will get back to you in no time.

This article was not written by a native English speaker. We apologise for any language-related inaccuracies.