- Verfasst vonPhilip Liebenow
- Veröffentlicht am03.January
- Lesezeit5min
Few financial topics cause as much concern for Germans as the fear of old-age poverty and worries about financial security in retirement. At the heart of this debate is one term: the pension gap. But what exactly does it mean—why does this gap exist in the first place, and what retirement planning strategies can be used to systematically close it?
Auf einen Blick
Definition: The pension gap is the difference between your final net income during your working life and your actual state pension in retirement.
Main cause: Demographic change – fewer and fewer contributors are funding an increasing number of retirees.
Solution: The pension gap can be reduced with additional retirement provision products, such as a high-yield company pension (bAV) or private pension plans.
What is the pension gap?
The pension gap describes a fundamental social problem in Germany: the state pension will be significantly lower in retirement than the average income during one's working years. Specifically, the personal pension gap is the difference between your final net income during your working life and your actual state pension in retirement.
Why does the pension gap exist in Germany?
The main driver of the pension gap is demographic change in Germany. The increasing aging of the population means that more and more people are drawing pensions, while fewer and fewer employees are paying into the system.
This has serious consequences: the low state pension in Germany increases the risk of old-age poverty. After at least 35 years of insurance contributions, the average pension in Germany is currently only €1,623, while around 20% of retirees have to get by on less than €1,400 per month—and this in the face of ever-rising living costs.
Calculating and understanding your personal pension gap
The personal pension gap describes the difference between your actual income from the state pension insurance in retirement and your desired pension (target pension) in old age. The amount of the target pension depends on the expenses you expect to have—these may be higher or lower compared to your working life.
What influences the personal pension gap?
- Higher expenses in retirement: e.g., increased leisure or healthcare costs
- Lower expenses in retirement: e.g., when mortgage payments or expenses for children are no longer a factor
How can the pension gap be reduced?
The good news is that the pension gap is not an inevitable fate. By supplementing your state pension, you can actively reduce this shortfall. Some of the most important options include:
- Company pensions – offered by your employer, featuring tax benefits and an employer subsidy
- Private pension plans – e.g., through ETF savings plans, Riester, or Rürup pensions
- Wealth accumulation – e.g., through investments in real estate or securities
Company pensions are a particularly effective tool: they offer not only tax advantages but also a mandatory employer subsidy of at least 15% – and guarantee a lifelong supplementary pension.
Conclusion: Understanding the pension gap is the first step
The pension gap in Germany is real – and it is a direct consequence of demographic change and declining pension levels. Those who understand why it occurs and how large it is in their own case can take timely action. The first step: analyze your own situation and consider additional retirement planning.
Further resources
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