How to save money (and save on your taxes) in Germany

In Germany, finding ways to save efficiently while minimising your tax liabilities is essential for building a secure financial future.

There are three main tax-efficient savings options to understand: the Basisrente (Rürup Rente), Betriebliche Altersversorgung (bAV) schemes, and the Privatrente. These plans not only provide significant tax advantages, but can also complement the state pension or serve as essential support for those, like freelancers and the self-employed, who may not contribute to the state pension system.

Start your tax-efficient savings journey with LeX-Wealth

Understanding tax-efficient saving options in Germany

It's important to understand the differences between these three main tax-efficient saving options. They each have their own strengths and weaknesses, and it's important to ensure your saving plan is tailored to your life. LeX-Wealth specialise in providing expats in Germany with personalised solutions for their pension, savings and insurance needs, so they can help make sure your choice is the best one.

1. First-layer pension policy: Basisrente (Rürup Rente)

The Basisrente (also known as the Rürup Rente) is a pension scheme that will primarily benefit self-employed individuals and high earners. It allows you to contribute towards your retirement while benefiting from significant tax deductions. This plan is especially crucial for those not contributing to the state pension, as it helps build a robust retirement fund with a guaranteed income for life.

How does a Basisrente policy work?

With a Basisrente policy, your contributions are tax-deductible up to certain limits. In 2025, individuals can deduct up to 29.344 euros from their taxable income (or 58.688 euros for couples). Contributions can be invested in a range of ETFs and mutual funds, and an income for life is provided upon retirement. Self-employed individuals, freelancers, and high earners looking for tax deductions can greatly benefit from a Basisrente policy.

One key thing to consider before deciding on a Basisrente policy is that your funds are locked away until retirement. The earliest possible access is from when you turn 62. This ensures that your savings are preserved for long-term use, but is worth considering if you think you may need to access your money before then.

Case study: Anna's journey with Basisrente

Anna, a graphic designer, decided to invest in a Basisrente. This allowed her to lower her taxable income significantly, saving thousands in taxes while simultaneously securing her retirement. Anna’s effective income tax rate is 40 percent, meaning for every 10.000 euros she invested, she receives a tax rebate of 4.000 euros, which could then be reinvested.

If you think a Basisrente policy might be beneficial to you, talk to a Lex-Wealth advisor about how to set one up, how it will impact your taxes and to answer any other questions you might have.

2. Second-layer pension policies: bAV schemes

Betriebliche Altersversorgung (bAV) schemes are employer-sponsored retirement plans that offer additional tax benefits. While they provide an effective way to save for retirement, they are only available to employees, and transferring your pension to a new employer is often not possible.

How does a bAV work?

Contributions to bAV schemes are also tax-deductible up to certain limits. However, these plans typically offer fewer investment options and are usually tied to your current employer. bAV contributions are optional but they are often encouraged by employers as part of a benefits package.

If you change your place of employment, it can be complicated to transfer your bAV and may depend on whether your new employer offers the same plan.

Another thing to bear in mind with a bAV scheme is that there can also be limitations on how much you can contribute. Limitations depend on the type of policy, but for most there is a cap of up to 8 percent of your gross monthly salary, up to 644 euros per month. For senior staff, such as directors, employers may opt for a bAV that provides higher tax-deductible allowances.

Case study: Maria's experience with bAV

Maria, a marketing manager, joined a bAV scheme offered by her employer. By participating in the scheme, she lowered her taxable income and saved a significant amount in taxes, demonstrating the benefits of employer-sponsored plans alongside her state pension contributions.

LeX-Wealth can help you decide whether a bAV scheme is a good option for you.

3. Third-layer private pension: Privatrente

The Privatrente is a flexible private pension plan that offers substantial tax advantages during the investment term and upon the point of drawdown. Unlike the Basisrente and bAV schemes, it provides complete control over how and when you access your capital and is particularly beneficial for high earners and individuals seeking more flexibility when building their wealth.

During the investment phase, the advance flat-rate tax (Vorabpauschale) is not deducted. Additionally, after the age of 62 and provided the investment has been held for at least 12 years, only half of the profits are taxable.

There are many advantages to a Privatrente pension plan depending on your situation, but two key ones are beneficial to most people. Firstly, you can choose from a wide range of investment options, including ETFs and mutual funds, giving you full control over your savings. Secondly, you can opt to make additional contributions as your financial situation allows, enhancing your retirement savings. 

Case study: Mark's Privatrente advantage

Mark, a successful entrepreneur, decided to invest 100.000 euros in a Privatrente to secure his financial future. By choosing this plan, Mark enjoyed greater flexibility with access to his capital, allowing him to withdraw funds as needed and even retire early if he chose to. When retirement comes, Mark will benefit from only paying tax on half of his gains, significantly enhancing his retirement income while maintaining the option to access his funds earlier if necessary.

Advisors at Lex-Wealth are specialists in managing savings plans for people from all around the world. With their expertise, you can be sure that your money is being put to its best possible use. 

Simple steps for maximising your savings

Where to put your savings is an important decision, but it's not one that needs to be taxing. By following these steps, and ensuring you have answers to any of the questions they pose, your savings plan will swiftly take shape:

1. Understand your specific needs: Assess your unique financial circumstances to choose the best savings options that fit your lifestyle and retirement plans.
2. Determine how much you need to save: Establish a clear savings goal to ensure you are on track to meet your retirement needs.
3. Plan for your retirement early: Starting early allows your investments to grow, providing you with more options and flexibility later on.
4. Work with an independent advisor: An unbiased advisor such as LeX-Wealth can provide personalised guidance, tailored to your financial situation and goals.

Start your savings plan today 

This is not an exhaustive summary of all of the saving options available, nor each plan's tax advantages and benefits. Each individual’s situation is unique, and the best set plan will vary on a case-by-case basis. Some individuals may benefit from one option, while others may find a combination of plans more advantageous.

Talking to one of the experienced advisors at LeX-Wealth can help ensure you have a happy and well-funded retirement. Ready to take control of your future? Contact LeX-Wealth today to optimise your savings and minimise your tax burden.