The German pension: what your 18.6% actually buys

The system: pay-as-you-go, split with your employer

The German pension is a Umlageverfahren (pay-as-you-go) system: your contributions don't sit in a personal pot - they pay current retirees, and future workers will pay yours. It's compulsory for employees:

• Contribution: 18.6% of gross salary, split 50/50 - you pay ~9.3%, your employer the other ~9.3% (Your German payslip decoded shows it on your payslip). Everything accumulates under your Sozialversicherungsnummer.
• Charged on income up to the Beitragsbemessungsgrenze (€8,050/month, ~€96,600/year in 2026) - earnings above that aren't pensioned.
• Run by the Deutsche Rentenversicherung (DRV), which sends you an annual Renteninformation letter projecting your future pension once you have enough contribution years.

Rentenpunkte: how your pension is actually calculated

Your future pension isn't a percentage of salary - it's built from Rentenpunkte (Entgeltpunkte / pension points):

• Earn the national average income (€51,944 in 2026) for a year = 1 point. Earn half that, 0.5 points; double it (up to the ceiling), ~1.95 points max per year.
• Each point is currently worth €42.52/month (from 1 July 2026) - so 40 points ≈ €1,700/month gross pension.
• Your lifetime pension ≈ total points × the point value at retirement (the value rises most years - pensions went up 4.24% in mid-2026).
• Points also come from child-raising years (Kindererziehungszeiten), some care years, and certain other credited periods - not only paid work.

So a full German career yields a modest but real state pension; most people top it up with the other pillars below.

When can you retire?

• Standard retirement age (Regelaltersgrenze) is rising to 67 - reached by everyone born 1964 or later.
• Rente mit 63 / early retirement: with 45 contribution years you can retire up to 2 years early without deductions (for 1964+ births, the penalty-free early age is 65 - the DRV retirement-age rules confirm the bands). Retiring earlier than allowed costs 0.3% per month permanently.
• You can also work past the standard age and boost your pension.

The 5-year minimum, and what expats get

Crucial for internationals: you need a minimum contribution history to get anything.

• 5 years (60 months) of contributions is the general minimum (Wartezeit) to qualify for a German pension at all.
• Contribute 5+ years and leave Germany? Your pension entitlement stays intact - the DRV pays German pensions into 150+ countries, so you claim it at retirement age wherever you live.
• Within the EU it is automatic: coordination rules mean insured periods in every member state count together for eligibility, with each country paying its own share - relevant if you arrive from an EU country and leave a part-built pension behind (see Moving from the Netherlands to Germany for how that plays out with the Dutch AOW).
• Totalization agreements: if your home country has a social-security agreement with Germany (US, Canada, India, Japan, South Korea, Turkey, and ~20 others), your German and home contribution years can be added together to reach minimums - so even under 5 German years may count toward a pension via aggregation.
• Non-EU, under the threshold, leaving for good? You may instead refund your contributions after a 2-year wait - the full mechanics are in The German pension refund.

The other three pillars (top-ups)

The statutory pension alone rarely maintains your standard of living, so Germany runs a three-pillar system:

• Pillar 1 - Gesetzliche Rente: the statutory pension above (mandatory).
• Pillar 2 - Betriebliche Altersvorsorge (bAV): workplace pension via salary sacrifice - you divert pre-tax salary, the employer must add at least 15%, and it cuts tax and social contributions now (Your German payslip decoded). Worth taking for the employer top-up.
• Pillar 3 - Private pensions:
• Riester-Rente: state-subsidised private pension for those in the statutory system - annual allowances (up to €175/person plus €300/child in 2026) plus tax relief. Note: subsidies may have to be repaid if you leave the EU, so weigh it as an expat.
• Rürup-Rente (Basis-Rente): tax-deductible private pension, better suited to the self-employed and high earners; no direct subsidy but strong tax relief.
• Plain private investing: many expats skip Riester's complexity and build a low-cost ETF portfolio instead - see Investing as an expat in Germany.

Should expats rely on it?

• Staying long-term: the statutory pension plus bAV plus some private investing is the standard plan, and your points build automatically toward Permanent residency (Niederlassungserlaubnis) (the pension-contribution record is part of qualifying).
• Here for a few years then leaving: contribute, and either keep the entitlement (paid abroad later) or refund it if non-EU - either way the money isn't simply lost.
• Americans: watch the US-tax treatment of Riester/private products (PFIC rules) - covered in Investing as an expat in Germany; the statutory pension and bAV are usually cleaner.

Frequently asked questions