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Ad­di­tio­nal services in a Pension plan

Besides the tax advantage and the stable lifelong pension, why should you do a pension plan? The insurance has some services that make your life a lot easier: One of the key ad­van­ta­ges of pension plans is the range of ad­di­tio­nal services that insurance companies offer to make your life easier. These services can help ensure that your re­ti­re­ment savings are well managed and that you are able to retire on your terms.

Table of Contents 

Re­ba­lan­cing the funds tax-free

One of the most important services offered by pension plans is yearly rebalancing.

This means that the per­cen­ta­ge ratio between the different funds in your plan is au­to­ma­ti­cal­ly adjusted every year to ensure that it remains in the right ratio, without you having to do anything. This is a key benefit, as it ensures that your portfolio remains well di­ver­si­fied. Ad­di­tio­nal­ly, because this service is tax-free, you can be confident that your savings will compound more quickly over time!

Pro­tec­tion against market crash before retirement

Another important service offered by pension plans is called „Ab­lauf­ma­nage­ment“!

This service is in­cre­di­bly helpful for re­ti­re­ment planning because it helps ensure that you have a stable portfolio when you reach re­ti­re­ment age. As you may know, investing in funds can be volatile, even if they are broadly di­ver­si­fied. When the world economy is going through a recession, funds can also go down. This is not a problem when you are just starting to invest for your re­ti­re­ment, because you can buy in at a lower price, and the market will recover over time.

However, what you don’t want to happen is for the market to go down 30% (or any other si­gni­fi­cant drawdown) in the year before you retire. If that were to happen, you would have 30% less than you would have had a year ago, and that could be a si­gni­fi­cant setback for your re­ti­re­ment. One pos­si­bi­li­ty is to wait a couple of years for the market to recover, but most people do not want to push their re­ti­re­ment 5 years in the future.

That’s where Ab­lauf­ma­nage­ment comes in. 5 years before you retire, the insurance company will au­to­ma­ti­cal­ly step by step shift your money from the volatile funds into more stable assets, such as bonds. Think of it like a savings account with a bit of interest, around 3%. Now when you’re close to retiring, you have a very stable portfolio, and even a recession can’t threaten your worry-free retirement.

In con­clu­si­on, pension plans offer many ad­di­tio­nal services that can make your life much easier when it comes to re­ti­re­ment planning. If you want to find out what plan fits you best, feel free to book a free initial con­sul­ta­ti­on with us.

About the Author

David Reinhard Profilbild

David Reinhard

Senior Consultant 
David is our expert for English-speaking customers as well as US citizens. He helps customers un­der­stand and make the best use of the German system. 

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