More and more self-employed people in Germany are choosing not to pay into the statutory pension insurance scheme. Reasons for this include the lack of flexibility and the poor returns of the state insurance scheme. But what alternatives are there?
One option is the so-called pension funds for the various occupational groups. These offer self-employed and freelance members an occupational pension scheme tailored to their needs. Members’ contributions to pension funds are deducted from their income taxes and the returns are often higher than with statutory pension insurance.
However, not every self-employed person is automatically exempt from compulsory pension insurance if he or she is a member of a pension fund. There are certain requirements that must be met here. You can find out what these are and how high the contributions are in this article.
Find out more about the advantages and disadvantages of pension funds and whether they are a suitable alternative to statutory pension insurance for you.
What are pension funds??
Versorgungswerke are commonly known as occupational pension plans for people in certain professions. They serve to provide members with social security benefits, especially in old age or in the event of invalidity. In Germany, pension funds are particularly common for freelancers such as doctors, lawyers or auditors.
Pension funds also play an important role with regard to the pension insurance obligation for the self-employed. Members of pension funds are exempt from the statutory pension insurance obligation, which means an enormous financial relief for many. Instead, they must pay contributions to the respective pension fund. Thus, many self-employed people can choose to become members of a pension fund in order to benefit from this exemption.
It should be noted, however, that membership in a pension fund is not open to all self-employed persons. The requirements for admission vary by occupational group and federal state. As a rule, however, you must be self-employed for several years and make a certain minimum contribution to the pension fund in order to be accepted.
As a conclusion, it can be said that pension funds play an important role in the protection of freelancers and represent an interesting option for the exemption from the pension insurance obligation. However, interested self-employed persons should thoroughly inform themselves in advance and check whether they meet the requirements for membership.
Examples of exemption from compulsory pension insurance
Compulsory pension insurance applies to all dependent employees in Germany. However, there are certain groups that can be exempted from this obligation under certain conditions. One of them are the members of the pension funds.
Pension funds are special institutions that are responsible for the professional pension provision of self-employed persons and freelancers. These institutions provide their own pension to their members and are therefore exempt from compulsory pension insurance. However, it is a prerequisite that the professional activity is carried out exclusively in the profession in question.
There are, however, exceptions in which self-employed persons and freelancers must also pay into the statutory pension insurance. This is the case, for example, if you are simultaneously in dependent employment or exceed certain income limits.
- Civil servants are also exempt from compulsory pension insurance, as they receive their own pension from their employer.
- Students and pupils in marginal employment are also exempt from the obligation to pay pension insurance contributions.
It is important to note that exemption from compulsory pension insurance is not automatic. The persons concerned must submit an application and the requirements must be met. Therefore, in case of doubt, you should contact the responsible office or an advice center to find out about your own obligations and rights.
How to be exempted from the pension insurance obligation
If you work as a self-employed person or freelancer, you normally have an obligation to pay contributions to the statutory pension insurance scheme. However, there are certain occupational groups that are exempt from this obligation and can alternatively opt for a pension scheme.
Pension funds are professional institutions that act as pension providers for certain occupational groups. This includes, among others, doctors, lawyers, architects and engineers. If you are a member of a pension scheme, you are exempt from the obligation to contribute to the statutory pension insurance scheme.
In order to be exempted from compulsory pension insurance, you must submit an application to the relevant pension fund. To do this, you must prove that you belong to a certain professional group and are therefore eligible for membership in the pension scheme. If your application is approved, you will automatically be exempt from compulsory pension insurance and will no longer have to pay contributions.
However, it is important to note that an exemption from compulsory pension insurance can also have disadvantages. For example, it may result in a lower pension in old age, as the benefits from the Versorgungswerk may be lower than those from the statutory pension insurance scheme. For this reason, you should inform yourself well in advance and, if necessary, seek professional advice before applying for exemption from compulsory pension insurance.
What are the benefits of being exempt from the pension insurance requirement?
If you work as a freelancer, you have the option of being exempted from compulsory pension insurance. Instead, freelancers can join a pension scheme. Exemption from compulsory pension insurance has a number of advantages.
- Flexibility: In pension schemes, freelancers can individually design their pension provision and adapt it to their needs. So they can decide for themselves how much they want to pay into their pension scheme.
- Attractive returns: Often pension funds offer higher returns than the statutory pension insurance scheme. This means that retirement provision can be made more effective.
- Security: the money paid into a pension fund is safe from insolvency and seizure.
Another advantage of exemption from compulsory pension insurance is the savings in contributions. Those who, as freelancers, would have to pay into the statutory pension insurance scheme usually have to surrender up to 18.6 percent of their income for this purpose. With a gross income of 50.000 per year, this would be up to 9.300 euros for pension insurance alone. Freelancers can therefore save a lot of money by being exempt from compulsory pension insurance.
However, there are also disadvantages to exemption from compulsory pension insurance. For example, freelancers who wish to be exempted from compulsory pension insurance must usually already have reached a certain age or be able to prove a certain income. In addition, they may have to pay higher contributions into the pension fund in order to build up adequate retirement provisions.
After examining the exemption from compulsory pension insurance for pension funds, we conclude that there are many advantages for members of these institutions. This means that they do not have to pay contributions to the statutory pension scheme and can pay into their own pension scheme instead.
Another advantage is that the benefits of the pension funds are often higher than those of the statutory pension insurance. It should be noted, however, that membership in a pension fund is often linked to certain conditions, such as membership of a specific professional group.
In summary, exemption from compulsory pension insurance for pension funds is an attractive option for members. However, here, too, it should be carefully checked whether the conditions are met and whether the pension fund offers sufficient coverage.
- Advantages of exemption from compulsory pension insurance for pension funds:
- No contributions to the statutory pension insurance
- Higher benefits than in the statutory pension insurance