Understanding the basic pension: tax-optimised retirement provision for your financial future
13.05.25
5
Minutes
Katrin Straub
Managing Director at nextsure
Looking for a retirement plan that really pays off for tax purposes? The basis pension, also known as the Rürup pension, offers attractive advantages, especially for self-employed people and high earners. Find out here how you can close your pension gap while also reducing your tax burden.
The topic in brief and concise terms
The basic pension (Rürup pension) allows high tax deductions for contributions during the accumulation phase, up to 29,344 euros for single individuals in 2025.
It is particularly suitable for the self-employed and high earners, as it provides a lifelong pension and is Hartz IV-safe.
Termination with a lump-sum payout is not possible; survivor cover often has to be arranged separately.
Basic pension at a glance: the key facts for quick readers
The basic pension is a funded pension insurance product for private retirement provision. It was introduced in 2005 and complements the statutory pension as well as other forms of provision. Contributions are tax-deductible as special expenses, which can lead to noticeable relief. [``] The payout is made exclusively as a lifelong monthly pension, from the age of 62 at the earliest (for contracts concluded after 31.12.2011). [`ü?`] A capital option, i.e. a one-off payment of the entire capital, is not предусмотрed. [`ü?`] This structure is similar to the statutory pension insurance scheme and is intended to ensure long-term provision in old age. For a more detailed look at the three pillars of retirement provision, read our in-depth article. The basic pension is also Hartz IV-proof and protected against attachment during the accumulation phase. [``]
Maximise tax benefits: How to benefit from the basic pension
The greatest advantage of the basic pension lies in its tax relief during the savings phase. Since 2023, contributions can be claimed in full as special expenses. [`üä`] For the year 2025, the maximum tax-deductible amount is 29,344 euros for single people and 58,688 euros for married couples. [`üä`] This amount also includes any contributions to the statutory pension insurance or to professional pension schemes. [`äü`] The higher your personal tax rate, the greater the tax savings from the basic pension. An example: A self-employed person with taxable income of 70,000 euros pays 10,000 euros a year into a basic pension. These 10,000 euros reduce their taxable income in full, which, assuming a marginal tax rate of forty per cent, means tax savings of 4,000 euros. The later pension does have to be taxed, but the personal tax rate in old age is often lower. [``] Information on the correct declaration in your tax return can also be found with us.
The tax treatment in the payout phase is as follows:
The taxable portion of the pension increases each year.
For retirements in 2025, 83.5 per cent of the pension is taxable. [`üä`]
This share increases by 0.5 percentage points for each new cohort of pensioners.
From 2058 onwards, new retirees will then have to pay tax on their basic pension at 100 per cent. [`äü`]
This deferred taxation is a key feature of the basic pension.
Target groups in focus: Who is the basic pension particularly suitable for?
The basis pension is aimed primarily at groups of people with a high tax burden and the desire for a solid basic provision in old age. Self-employed people and freelancers in particular benefit, as they often have no or only very limited entitlements from the statutory pension insurance scheme. [``] For them, the basis pension is an important pillar of retirement provision for the self-employed. Well-paid employees can also close their pension gap with the basis pension and benefit from tax advantages. [``] The flexibility of contributions is another plus point, as contributions can often be adjusted to the respective income situation. [``] Many contracts allow additional payments or a reduction in contributions. The basis pension can also be of interest to people who are close to retirement and want to invest a larger sum in a tax-optimised way for retirement provision, for example via a single-premium annuity. [`ö`]
Flexibility and survivor protection: What happens in special life circumstances?
A frequently discussed aspect of the basic pension is its flexibility. Termination of the contract with payout of the capital is excluded by law. [`äü`] This serves to protect retirement savings assets. However, it is possible to make the contract contribution-free. [`äü`] This means that no further contributions are paid in, but the existing capital continues to earn interest and is later paid out as a pension. A change of provider is not regulated by law and depends on the contractual terms. [``]
For the event of death, there are provisions for survivor protection, but these often have to be agreed separately:
Survivor's pension: Spouses or children eligible for child benefit (up to a maximum age of 25) can receive a pension. [``]
Refund of contributions: If the insured person dies during the accumulation phase, the contributions paid in can be paid out to the survivors. [``]
Pension guarantee period: If the insured person dies during the pension phase within an agreed guarantee period (e.g. ten years), the pension continues to be paid to the survivors for the remaining time. [``]
Without such additional agreements, the accumulated capital lapses in the event of death in favour of the collective pool of policyholders. [``] A careful review of the options for survivor protection is therefore essential. Also compare this with the options of a private pension insurance.
Deepen your expert knowledge: Legal basics and design tips
The tax treatment of the basic pension is regulated in Section 10 of the Income Tax Act (§ 10 EStG). [`ü?`] There, the requirements for tax recognition are set out, such as lifetime pension payments and non-inheritability without an additional agreement. [`10`] Recent judgments, for example by the Federal Fiscal Court (BFH), have in the past clarified aspects of pension taxation and contributed to adjustments to the statutory provisions, such as the full deductibility of contributions from 2023 onwards in order to avoid double taxation. [`10`]
Our expert tip: When selecting a basic pension contract, pay attention not only to the costs, but also to the flexibility of the contribution payments and the options offered for survivor benefits. A unit-linked pension insurance as a basic pension can offer higher return potential, but also carries higher risks. [`ü?`] Check the possibility of integrating occupational disability supplementary insurance into the basic pension contract, whose contributions may also be tax-deductible. [`ü?`] This can be a useful addition to your Rürup pension. Let us provide you with comprehensive advice so that you can find the optimum solution for your situation.
Basic Pension Compared: Distinction from Riester and Private Pensions
The basic pension is part of the first pillar of retirement provision, similar to statutory pension insurance. The Riester pension belongs to the second pillar and is primarily supported through allowances and secondarily through tax advantages. [``] It is intended primarily for employees and families with children. Private pension insurance (third pillar) offers the greatest flexibility, for example with capital payout, but lower or no state support during the accumulation phase. [``] The basic pension stands out for the highest tax-deductible contributions during the accumulation phase, especially for higher earners and the self-employed. [``] However, it is more restrictive in the payout phase and in terms of inheritance. Occupational pension provision is another important pillar, often supported by the employer. The choice of the right product depends heavily on your individual life and income situation. A precise analysis of your needs is crucial before you decide on a particular form of insurance and tax.
The basic pension offers an attractive way to save for retirement with state support while benefiting from significant tax advantages. In particular, self-employed people, freelancers and employees with a high income can reduce their tax burden and at the same time build up a lifelong pension. Careful planning and choosing a suitable policy that takes your individual needs in terms of flexibility and provision for dependants into account are important. Compare offers and pay attention to the cost structure and investment approach, for example in a unit-linked option. Remember that dealing with your retirement provision at an early stage helps you effectively close coverage gaps. Make the most of the state support available. At nextsure, we will be happy to help you analyse your individual situation and develop the right retirement planning strategy.
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More useful links
German Pension Insurance provides an official definition of the Rürup pension in its glossary.
Federal Ministry of Finance provides a glossary entry with explanations of relevant terms relating to retirement provision.
Wikipedia provides a comprehensive overview of the Rürup pension, how it works and its tax treatment.
Federal Ministry of Finance provides a detailed brochure on the taxation of retirement income as a PDF for download.
German Pension Insurance provides information on the current rules on the taxation of pensions.
Statista offers up-to-date statistics and market data on retirement provision in Germany.
Federal Ministry of Labour and Social Affairs provides facts and information on retirement income and the need for additional provision.
Federal Agency for Civic Education examines the role of occupational and private pension provision in pension policy.
Lower Saxony Consumer Advice Centre offers independent information and advice on the Rürup pension (basic pension) from a consumer perspective.
FAQ
What is the maximum tax-deductible amount for the basic pension in 2025?
In 2025, up to EUR 29,344 (single) or EUR 58,688 (married) can be claimed for tax purposes as special expenses for the basic pension. [üä]
When can I start receiving the pension from my basic pension contract at the earliest?
For contracts concluded after 31 December 2011, a payout is possible only from the age of 62. For older contracts, the limit may be 60 years. [ü-?]
What happens to my basic pension if I die?
Without an additional survivor protection arrangement, the capital usually reverts to the pool of policyholders. With options such as a survivor’s pension or a guaranteed annuity period, spouses or children can be covered. [``]
Can I cancel my basic pension contract?
Cancellation with a lump-sum payment is not legally possible for the basic pension. However, you can make the contract paid-up. [äü]
Do I have to pay tax on payouts from the basic pension?
Yes, pension payments from the basic pension are taxable. The taxable portion depends on the year the pension begins and increases gradually. [üä]
Can I also take out a basic pension as an employee?
Yes, employees can also take out a basic pension. It can be particularly useful for higher earners as a supplement to the state pension, to top up retirement provision and make use of tax advantages. [``]
