Immediate pension: A convenient pension option, but not suitable for everyone
Created: 11/18/2022, 4:00 p.m
By: Anna Heyers
Pay in once and receive payments for the rest of your life – more and more older people are opting for the so-called immediate pension.
But for whom is it really worth it?
Many people, especially in old age, do not want to deal with managing their assets.
The immediate pension is intended for precisely those.
You pay a large amount into the pension insurance once.
Almost immediately afterwards, the pension payments can begin - and that until the end of life.
And the best thing about this variant: After the one-off payment, you basically don't have to worry about anything anymore.
Stiftung Warentest
recently tested 20 different instant annuity offers and found that the amount of the current monthly annuity payments is quite modest
.
However, if the insurance company invests the money profitably for its customers (and pays a profit sharing), this could change in the future.
Pension until the end of life: How does the immediate pension work?
An immediate pension is a form of private old-age provision.
A higher sum is paid into the pension insurance once.
This amount could come from an expired life insurance policy or an inheritance, for example.
The insurer then calculates a monthly pension with a certain amount from this “one-time contribution”.
This is guaranteed until the end of life.
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The immediate annuity is also called an annuity because it is linked to your own life.
Advantage: You don't have to worry about not having any money in 20 years.
Disadvantage: Insurers usually expect that an age over 90 will be reached.
Depending on the amount of the single contribution, the monthly pension payment is rather low.
By the way: Payments for old-age provision can usually be deducted from taxes.
For whom is the immediate pension worthwhile?
The immediate pension can prove to be useful for those who want to close a pension gap and need a permanent income to do so.
The immediate annuity could also be an attractive offer for investors who have no need to take care of their savings.
Fun and joy even in old age - and preferably without money worries.
The immediate annuity can be a good means.
© agefotostock/Imago
Do the following points apply to you?
Then an immediate pension can definitely be worthwhile for you:
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Your current (lifelong) income is not yet sufficient to finance your desired standard of living.
They are fit, healthy and expect to live long.
You have a large amount of money in your account (due to a life insurance policy or similar).
You want little to no income fluctuations.
Financial security is more important to you than returns.
You don't want to worry about investing yourself, especially when you're old.
Losses are acceptable if you want to make a capital payment later.
Your focus is not on protecting survivors or heirs.
In addition to the statutory pension, you will not receive any additional pension (e.g. company pension).
Pension: How much is guaranteed with the immediate pension?
The experts at
Stiftung Warentest
have counted on a 65-year-old customer (Erika Mustermann) who has invested a one-off amount of 100,000 euros in the immediate pension.
With this money she “buys” a future monthly extra income.
Immediate annuity from a life insurance company
The immediate annuity from a life insurance company covers the so-called longevity risk.
This means that even if the promised pensions (when the contract is signed) are not exactly high, they flow until the end of the customer's life.
It doesn't matter how old he gets.
In this example, Erika Mustermann receives a guaranteed minimum pension of between 258 and 284 euros with her payment.
If she had chosen a higher lump sum, the monthly pension would also be higher.
With a lower amount, which would also be possible, the pension would also be lower.
Is the immediate pension linked to a certain age?
no
At least the immediate retirement age does not depend on when you actually retire.
A contract can also be concluded if the customer is younger - or older - than 65 years.
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What can be an alternative to immediate annuity?
Anyone who does not want to give up their investment has an alternative to an immediate pension in a flexible payment plan with a share ETF that can be adjusted at any time.
In doing so, you are basically on two tracks between regular withdrawals from (risky) equity funds and (safe) overnight money investments.
Depending on how well things are going on the capital markets, the payout plan can be very lucrative.
Anyone who pays attention to sustainability can also take this into account with ETF funds and choose those that act ethically and ecologically.
What pension options are there – and which ones are right for you?
The employees of the
Deutsche Rentenversicherung (DRV)
will inform you competently and neutrally about various pension options.
So you can decide which of them makes the most sense for you.
Personal advice from DRV on old-age provision is free of charge.
If things are not going so well, however, the immediate annuity would have been a better choice.
Many interested parties therefore like to choose the best of two worlds: the payment plan takes over the first years of retirement, the immediate pension after that.
