Short overview of the pension problem

john
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john
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Joined: September 8th, 2001, 10:12 pm

February 24th, 2007, 10:06 pm #1

If you are a freelance teacher in Germany or are thinking of moving here to teach English, you need to know that there is an ancient German social insurance
law that obliges freelance teachers to pay (currently) 19.5% of their income before tax into the state pension scheme.




This is not an option, but a MUST for all freelance teachers working here once their income
averages more than 400 a month... and you have to continue paying in even if your income from teaching subsequently falls below that.




The German pension authority, known as the 'Deutsche Rentenversicherung' or '
DRV', can (and will) demand back payments for up to four years if you have not been paying these
contributions.




Some teachers think that:




having a private pension scheme may help, but this is NOT the case.


(You can take out a private scheme - or have one, but you still HAVE TO pay into the state
scheme).




they can avoid these payments by arguing that they were ignorant of this law/requirement.


(That is unfortunately NOT the case).




The German pension authority will never find them and demand back payments.


They may be lucky, but the German pension authority can check any company or school whenever it wishes to and if your name is on their books... Oops! Ouch!




Don't kid yourself!




Pension payments of 19.5% of your income before tax is a LOT of money!




If you are caught for back payments, it will probably wipe out all your savings and cripple you financially.




Please, please take these COMPULSORY contributions into account if you are working or thinking
of working here.




Paying 19.5% of your income may make your life here very difficult, but not paying them and then being caught for back payments could make your life here
impossible.




I know a lot of EFL teachers who have been financially crippled by the back payment demands, or thought they had no alternative but to flee the country.




Please don't make the same mistake.




If you are a freelance teacher and earn more than €400 a month on average from your freelance teaching work, you have to pay 19.5% of your income after
expenses and before tax into the DRV (or BfA as they previously called themselves).
Last edited by john on April 19th, 2008, 9:24 pm, edited 1 time in total.

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minelli
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minelli
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Joined: November 13th, 2008, 5:50 pm

November 13th, 2008, 5:50 pm #2

Hello John,




Thank you for the many extremely helpful posts. Frankly I am shocked & flabbergasted to find the fix I'm in after a beggardly freelance teaching career
of 7 years. I stumbled here completely by chance - better late than never is absoltutely the correct term!




So to verify matters, if you would, please?




1. I can see that I HAVE to pay, and as I've just become a German there's no where to run :-). Anyway as said I'd probably get some/ most/ all? of
it back depending on my life span! So I'll try to cough up, even begging for time to pay by installments, before they come knocking, hopefully.




2. I started my freelance English teaching in 2002 and am at it still. The school I work in should offer me a contract with all the social insurance
contributions paid in, in the coming months, if nothing untoward happens; but one never knows... Seniors in the school say they never paid up when freelance
and went on after the better contract with only 50% contributions. They advice me to stay put for a few months. Should I?




2. Or should I rather be proactive and start the process? Does one add up all the takings for the past years and calculate 19,5% off that, or go year by year
and add them to get the final amount? Should I calculate for the past 5 years or all 7? I believe I earned on average more than 400 euros per month, all of
these years.




3. Once I have a rough idea of the figure, should I contact the DRV through a lawyer? I don't have one at the moment but following a link given in this
forum I found one specialising in sozialrecht including sozial versicherungsrecht in our area. Thanks for the link!


Or should our tax consultant company that has done my taxes since 2002 do it? Somehow I don't belive that I, myself and me alone with my B1 German is up to
the task.




4. I feel it would be best to be upfront and confess; and not wait to be 'caught'. Ugh. But is it wise? Especially as I'm in debt (work has been
erratic, family emergencies, sicknesses...) and will need time to collect the amount. Should I rather contact them when I have at least part of the money with
me?




5. Going forward, if I don't get the other contract pretty soon, and find that the school for whatever reason would rather not give it to me if they
possibly can, or will delay it as much as they can, shall I drop my teaching income to less than 400, and get on to translating etc, while slowly paying the
backlog for the past years? That way the burden would be less, as otherwise it would just keep adding up. This way I would alteast have paid up the min 5 year
contributions to be eligible for a state pension, wouldn't I?




This was the best I could think of after reading through almost all the posts. Could you advise me please?


I'd be very grateful.


Thank you.
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minelli
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minelli
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Joined: November 13th, 2008, 5:50 pm

November 13th, 2008, 5:56 pm #3

Actually, I think, the best thing would be to give up teaching altogether, and do other things, if the said contract doesn't materialise soon. Isnt it?
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john
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john
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Joined: September 8th, 2001, 10:12 pm

November 14th, 2008, 9:07 pm #4

The DRV can ask you for back payments for the last four years... and that could mean a very painful back payments bill.




What you should of course do is to contact the DRV and ask them to calculate how much you owe them. They will then ask for you for a breakdown of your income
and expenses for the last four years and demand approx. 20% of your net income in that period.




What happens if you decide not to do that and start paying pension contributions as an employee?




Well, I'm afraid you won't be entitled to a German state pension based on contributions from 2004 onwards, but from 2008 (or whenever you sign that
contract) onwards.




After four years of being an employee (2012 in your case), the DRV can no longer ask for back payments from you.




If they catch up with you in 2010 and demand back payments, you would 'only' have to pay back payments for 2007 and 2008.




You should out yourself to the DRV, but I am sure that most people would understand if you decided not to do that.

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minelli
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minelli
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Joined: November 13th, 2008, 5:50 pm

November 15th, 2008, 8:49 pm #5

Thank you very much for the quick reply.




So if the contract comes up soon, I can chance it, and save up for it in case...Continuing teaching will have no major horrors lurking, then. Peace.




If no contract seems the major issue. Then


- I'd give up this work. Its way too risky as I see it. Just do honest to god translations and whatever else that comes up other than 'transfering
knowledge and skills'.


-out myself to DRV asap I have talked with a lawyer.


-start paying up.


Will I be eligible for a state pension atleast in this way, as it would cover 5 years 2004-8? That would sweeten this bitter bitter pill somewhat.




Thank you for sharing all your accumulated knowledge so generously.
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Pixie
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Pixie
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Joined: January 4th, 2009, 7:24 pm

January 4th, 2009, 7:24 pm #6

May I ask what the interest on unpaid state pension payments is likely to be and if a person leaves Germany and returns home, then do the state pensions become
void? Any info would be most appreciated, thanks
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john
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john
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Joined: September 8th, 2001, 10:12 pm

January 8th, 2009, 10:53 am #7

As far as I'm aware, you don't have to pay interest on unpaid pension contributions, but I could be wrong there.




If you return home and have paid enough contributions to be entitled to a German pension, i.e. paid in for more than five years, you will not lose the right to
claim a German pension.




If you are an EU citizen, the payments you made in Germany are added to your state pension back home.




If you are not an EU citizen you should be able to claim back all the contributions you made if you have been here
less than five years.




If you are a non-EU citizen and have been here for more than five years (and have paid pension contributions for longer than five years), you should contact
the DRV to find out what they will do with the contributions you have paid in and how you can claim a German pension.
Last edited by john on January 9th, 2009, 11:12 pm, edited 4 times in total.

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danie
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danie
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Joined: August 18th, 2009, 2:21 pm

August 18th, 2009, 2:20 pm #8

Hello Everyone,




I'm new to this site and have a few questions and hope that someone can answer. I have been in Germany teaching freelance English since September 2007.


I am getting my taxes done for 2008 and after I receive this assessment, I want to sign up with the DKV to avoid problems down the line. Does anyone know
whether I have to:




1. Pay contributions on my 2007 income (lower than 7,000 euro)


2. Pay all contribution payments starting from the time I came.


3. If I earn less in 2009, will the contributions be the same as 2008, or can they be adjusted


4. Can I pay backpayments in installments




I'm also worried that the DKV will try to tell me what my income should be, even though I am freelance and don't earn much. Thanks for any help!
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john
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john
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Joined: September 8th, 2001, 10:12 pm

August 18th, 2009, 9:20 pm #9

Hi Danie




I'm afraid you will almost certainly have to pay pension contributions for 2007 if you earned more than €400 a month after expenses.




If you think you will earn less than the DRV estimates, the contributions you have to pay can be adjusted, but you have to contact the DRV and explain why you
think your income will be lower.




Back payments in installments are negotiable... and usually necessary.




Don't worry too much there.




A good social insurance lawyer might cost more than what the DRV thinks you should pay in every month, but could save you a lot of time, worry and money in the
long run.




Good luck!!!




John

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danie
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danie
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Joined: August 18th, 2009, 2:21 pm

August 19th, 2009, 8:07 am #10

Thank you very much John. Your help is really appreciated. I have read so many messages and threads on this board and realize that you are a driving force of
information and encouragement. God Bless!




Danie
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