Too little pension: Effective strategies for topping up your retirement income
24.04.25
8
Minutes
Katrin Straub
Managing Director at nextsure
Will your pension be enough for a worry-free life? Many people in Germany are faced with this question. Discover tried-and-tested approaches to improve your retirement provision. Top up your pension and avoid financial shortfalls in later life.
The topic in brief and concise terms
If your pension is too low, state benefits such as basic income support (check eligibility for income below €1,062) and housing benefit can help.
Voluntary contributions to the statutory pension insurance can offset deductions and increase your pension from age 50.
Private pension provision (e.g. Riester with a €175 basic allowance) and occupational pensions are essential.
Recognising the pension gap: analysing causes and effects
Many employed people underestimate the size of their later pension gap. Often, they are short of tens or even hundreds of euros each month. The average statutory pension in 2023 was €1,550 gross. For many, this amount is barely enough. Even small gaps in working life can reduce the pension by several percentage points. The causes are varied: interrupted employment histories, part-time work or low incomes over many years. Inflation can also significantly erode the purchasing power of the pension over two decades. A precise analysis of one’s own situation is the first step towards improvement. This paves the way for targeted countermeasures.
Make use of immediate help: basic security and housing benefit as support
If income in old age falls below the subsistence minimum, the state steps in. Basic income support in old age secures the essential cost of living. You submit an application to the social welfare office. As a rule of thumb, if your income is below EUR 1,062, you should have your entitlement checked. Basic income support covers standard needs and reasonable housing costs. In addition, housing benefit may be an option, especially if your pension is just above the basic income support level. The protected assets allowance for basic income support is EUR 10,000 for single people. These benefits must be actively applied for. Early information about the three pillars of retirement provision helps you assess your own situation more accurately. Reviewing these options can provide initial financial relief.
Maximise your state pension: optimise contributions and qualifying periods
The amount of the statutory pension depends on pension points and contribution years. Every month counts. Voluntary additional contributions can offset pension reductions. This is possible from the age of 50. For every month of earlier retirement, 0.3 per cent is deducted. Continuing to work beyond the statutory retirement age also increases the pension. There is a bonus of 0.5 per cent per month. Missing contribution periods, for example for training, can be made up by back payments until your 45th birthday. A consultation with the pension insurance provider clarifies individual options. A careful review of the pension notice is an important step towards optimisation.
Expand private pension provision: choose state subsidies and suitable products
Private pension provision is an important building block. The Riester pension is subsidised by the state with allowances. The basic allowance is 175 euros per year. For children, there are additional allowances of up to 300 euros. To qualify for a Riester pension, at least four per cent of the previous year’s gross income must be paid in. The Rürup pension, also known as the basic pension, is particularly interesting for self-employed people and high earners. Contributions to the Rürup pension are tax-deductible. A company pension scheme (bAV) also offers advantages through employer contributions and tax savings. The classic private pension insurance offers flexibility. Here is an overview of the options:
Riester pension: State allowances of 175 euros plus child allowances.
Rürup pension: High tax deductibility of contributions.
Company pension scheme: Often with employer contributions and tax savings.
Private pension insurance: Flexible options for your private supplementary pension.
Fund savings plans/ETFs: Higher return potential in the long term with corresponding risk.
Contributions to private pension insurance (without state subsidy, from 2005) are not directly tax-deductible. The payout is taxed only on the earnings portion. A retirement calculator can help determine your own needs. Careful selection is crucial for long-term success.
Generating additional income: work and investments in focus
In addition to the pension, further income can improve your financial situation. A mini-job of up to 538 euros per month is often tax-free and exempt from social security contributions for pensioners. Part-time employment can also be an option. Rental income from property provides a regular source of income. Capital gains from shares or funds can also supplement the pension. Diversifying risk is important here. Even small, regular additional earnings of 100 to 200 euros can noticeably improve quality of life. Careful planning and adjustment to individual circumstances are important here. These additional sources can significantly reduce the pension gap.
Seek expert advice: check your pension notice and understand the legal basis
The pension assessment is a complex document. Errors can lead to financial disadvantages. Having it checked by independent pension advisers or specialist solicitors may be worthwhile. The costs vary, but if the review is successful they may be partially reimbursed. Deutsche Rentenversicherung itself offers free checks. [__] According to estimates, every third to fourth pension assessment is incorrect. The legal basis for basic security in old age is set out in the Twelfth Book of the Social Code (SGB XII). In particular, Section 41 SGB XII governs those entitled to benefits. An entry for retirement provision in the tax return may also be relevant. A sound understanding of these aspects safeguards your entitlements.
Our expert tip: Have your pension assessment checked independently at least once. This is particularly advisable if you have had a complex working life. Corrections can often still be made retrospectively for up to four years. [___3]
The prospect of too little pension need not be fate. With timely planning and the right strategies, you can actively shape your retirement provision. Make use of state subsidies, optimise your statutory entitlements and consider private retirement provision options. Every step you take today can improve your financial situation in old age. Start planning early to close gaps in provision effectively.
Request an individual risk analysis now: have your insurance situation reviewed free of charge and receive concrete suggestions for optimisation.
More useful links
Deutsche Rentenversicherung offers a comprehensive overview of the various options for retirement provision.
Deutsche Rentenversicherung explains in detail the three pillars of retirement provision in Germany.
Pension Overview enables you to obtain an overall overview of your individual retirement provision entitlements.
Deutsche Rentenversicherung provides a brochure on occupational pension provision, containing important information for employees and employers.
Federal Ministry of Labour and Social Affairs provides information on the current regulations and policy developments in the area of pensions and retirement provision.
Deutsche Rentenversicherung gives practical tips on how you can optimise your retirement provision shortly before retirement begins.
Wikipedia offers a general and comprehensive introduction to the topic of retirement provision.
Deutsche Bundesbank publishes analyses and data on retirement provision from an economic perspective in its monthly report.
FAQ
When should I start saving extra for retirement?
The earlier, the better. You benefit from the compound interest effect as soon as you start your career. Even with smaller amounts, you can build up a substantial fortune over the years. For young people under 25, Riester offers a one-off bonus of 200 euros.
Can I check my pension notice myself?
You can check your insurance record for gaps. However, for a detailed review of the complex calculations, it is often advisable to seek help from experts such as pension advisers or the German Pension Insurance Institution.
What happens to my private pension provision if I receive basic income support?
Subsidised retirement savings assets from a Riester pension count as protected assets. However, when paid out, the Riester pension is partially taken into account as income, with allowances (e.g. €100) applying.
How does inflation affect my pension?
Pensions are adjusted annually, with wage trends playing a major role. In recent years, pension adjustments have sometimes been above and sometimes below the inflation rate. In the long term, inflation can erode purchasing power.
What documents do I need to apply for basic income support?
You will usually need evidence of income (pension notices, interest income, etc.), assets (savings books, securities), housing costs (tenancy agreement, service charge statement) and personal documents (identity card).
Is it still worth making private provision shortly before retirement?
Yes, even shortly before retirement there are options. For example, lump-sum payments can be sensibly invested in an immediate annuity or targeted short-term savings plans to help increase monthly income a little.
