How to save for your child's future in Germany: Pensionfriend’s Kids ETF Savings Plan

Understanding how the German pension system works can be challenging, especially for expats. If you work in Germany, then you almost certainly contribute to a state pension, but did you know that many people also contribute to another pension plan to boost their retirement savings? If you have children, they can also be added as beneficiaries of these plans, meaning you can save for your retirement and for your children, both at the same time. 

Save for your future - and your child's - with a Pensionfriend Savings Plan

Pensionfriend offers a private pension plan focused on expatriate citizens living in Germany. If you want to save for your retirement but also provide for your children, this plan can do both. 

With a Pensionfriend Kids ETF Savings Plan, you can add your child as a beneficiary and profit from tax advantages and other benefits. Here’s how you can use Pensionfriend’s Pension Plan to save for your children, whether for higher education, purchasing a home, or starting a business. 

Save with Pensionfriend and benefit from tax advantages - and more

Dr. Chris Mulder, co-founder of Pensionfriend and a father of three, emphasises the importance of building a safe and sound financial future for your children. A Private Pension Plan from Pensionfriend offers significant advantages, providing the opportunity for high returns with a carefully chosen ETF portfolio and tax-free rebalancing. 

A Pensionfriend Kids ETF Savings Plan is an ideal tool to save for your child's future, as you can avoid paying capital gains tax on the savings. This can save you from paying taxes of up to 26,375% on your assets.

Here is how it works: As students your kids can benefit from the income tax free threshold. If they withdraw an amount that yields them less than 11.604 euros in capital gains (in 2024), they do not need to pay any capital gains tax.

You keep control over the plan until you are ready to gift, which may come in handy if you don't feel they are ready to handle a large sum of money. If they would be eligible for student support, you can transfer the savings plan to them at a later point - as having too many assets makes them ineligible for the support. 

Moreover, by adding your child as a beneficiary of your Pensionfriend Kids ETF Savings Plan, before you actually gift it to them, they will benefit from the following in the case of your death:  

• Not having to pay the capital gains tax on the amount paid, as it is treated as an insurance payout. 
• Getting paid up to 110 percent of the total accumulated value of your pension pot. So if you contributed 20.000 euros, they would get a payout of up to 22.000 euros. This is in addition to any capital gains. This may be a good augmentation of the assets you leave behind in case of your untimely death. 

Why is the Pensionfriend Kids ETF Savings Plan different from the regular Sparplan?

The Pensionfriend Kids ETF Savings Plan's tax-free transferability and potential for tax-free payouts provide a unique advantage for parents planning their children's financial future. Your children can receive up to 400.000 euros every 10 years without incurring taxes. Tax rates apply to gifts for children and grandchildren after certain exemptions. 

These are 7% for the first 75.000 euros, 11% up to 300.000 euros, 15% up to 600.000 euros, and then 19% up to 6 million euros. The rates are lower than the 26,375% capital gains tax rate. So saving on capital gains tax is recommendable. 

The key benefits of a Private Pension Plan from Pensionfriend

Pensionfriend stands out from the competition by not charging upfront fees and maintaining low ongoing costs. The fund selection algorithm tailors your portfolio based on your retirement goals and risk preferences, and dynamically adapts to changing factors. The plan consistently outperforms benchmarks like the MSCI World and S&P 500 by up to 2%. 

Another advantage of the Pensionfriend Plan relates to the so-called “tax wrapper”: only half of the investment return is subject to taxation if withdrawn as a lump sum after the age of 62. Key information such as this, as well as the answers to some frequently asked questions, are displayed in your personal Pensionfriend dashboard when you sign up for a plan. 

Start a Pensionfriend Plan today

Sounds like the right solution for you and your children? It only takes a few steps to start a Pensionfriend Kids ETF Savings Plan:

• Determine your savings targets using the online calculator
• Schedule a consultation with a Pensionfriend advisor to receive personalised guidance
• Sign up for a Pensionfriend Kids ETF Savings Plan

Get more information about German pensions

Are you interested in gaining deeper insights into the German pension system? Join one of Pensionfriend's free webinars.