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How Do German Renters Pay For Their Pensions?

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Germany is apparently the best place to be a tenant, better security of tenure, longer tenancies and laws mostly in favour of the tenant. However, tenants still have to pay the rent. However they still manage to be able to save for a pension.

Does anyone know how exactly this works in Germany so that a tenant can actually afford to pay towards a pension and why it could not be replicated in the UK?

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Rents in Germany/Austria are heavily controlled, new supply is not constrained by VIs, and tenancy agreements can more or less only be cancelled by the tenant and not the landlord. There are also strict rules on price escalations. There are even families with old contracts which can be passed on through generations where the rates have compounded below inflation for a few decades now.

I'll try and find some data but was looking at some numbers in Vienna the other day and rental prices were really low even for prime areas. However, property yields are also low as the market to buy is kept very well supported by institutional investors/landlords. A block of flats on 2.5% yield looks better than German sovereign debt on 1.5% or whatever it is now. This means rent vs. by maths never works (high asset price, low rental income and low yield) so working classes never become asset owners. However, their masters sweat them in other ways like shocking real wage declines to boost the profits of the industrial sector! :-) Swings and round abouts! They seem happy enough however.

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Lower house prices, better security of tenure, tougher laws on landlords all lead to lower rents.

Lower rents lead to more disposable income, pensions become affordable.

They also appear to have a better pension system with it consisting of three components, state pension, voluntary occupational pension and private provision. You have too contribute to the first and it is linked to average earnings. contributions to this pension are 50% employee/50% employer.

The state pension payouts seem to be more generous than our system as well but as mentioned above are better funded.

I would imagine German regulation of the pension market it is much tighter than ours with less rip off fees.

Edited by Ulfar

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Germany is apparently the best place to be a tenant, better security of tenure, longer tenancies and laws mostly in favour of the tenant. However, tenants still have to pay the rent. However they still manage to be able to save for a pension.

Does anyone know how exactly this works in Germany so that a tenant can actually afford to pay towards a pension and why it could not be replicated in the UK?

Judging by the number of very old Germans who are still in work Germany is maybe not the paradise some on here will have you believe. They also tend to work at work rather than updating their facebook statuses like a lot of UK workers.

Regarding renting, better be prepared to behave - no rave parties etc. and do regular maintenance if you rent in the fatherland.

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Here in Germany paying into a pension is not optional. Every month taken out of your wages is your pension, just like national insurance ant PAYE is in the UK.

The amount is significant, and although I have only been here a few years, if everyone here pays the same amount over their lifetime then they should have a hefty sum saved by retirement

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Judging by the number of very old Germans who are still in work Germany is maybe not the paradise some on here will have you believe. They also tend to work at work rather than updating their facebook statuses like a lot of UK workers.

Regarding renting, better be prepared to behave - no rave parties etc. and do regular maintenance if you rent in the fatherland.

It's true about Germans working at work, but then the hours are generally shorter than in the UK. And I don't remember seeing any more very old Germans still working than I do here, i.e. very few.

As for renting, it's true that you're expected to have consideration for your neighbours, but maintenance? I don't remember doing any maintenance at all in the 10 years I rented in Germany! If anything needed work, I just called the Hausmeister to get it sorted.

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A bit more on topic: although a larger proportion of Germans than Brits are renting at a particular time, most Germans do buy a house at some point, after having saved perhaps half the cost of the house. They just tend to rent for longer before doing so. And thay tend to stay put once they have bought a place; Germans don't flip!

Edited by snowflux

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@snowflux

German rental contracts can stipulate that the property needs to be decorated on a certain schedule, say every 3 years, to be kept in good repair.

Regarding pensions, with demographics they are an even bigger ponzi than UK pensions.

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@snowflux

German rental contracts can stipulate that the property needs to be decorated on a certain schedule, say every 3 years, to be kept in good repair.

Regarding pensions, with demographics they are an even bigger ponzi than UK pensions.

In our case the contract stipulated only that the property should be redecorated (i.e. walls painted) when we moved out, though in my case a loophole in the law meant that I got away without even doing that. As for keeping it in good repair, as I say, that was the Hausmeister's job. We had a duty to let him know if something was broken, but it was his job to fix it. I didn't have to do anything in 10 years apart from changing light bulbs.

Edited by snowflux

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From German friends: rents are controlled and cheaper. They get NI contribution equivalents taken for pensions (and there's more there to take as less gets spunked on rent).

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Their property isn't their pension. Their pension is their pension.

and their pension is with a company who probably has a large property rental portfolio - so their pension is probably backed by rental property

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Their property isn't their pension. Their pension is their pension.

I think this is closer to it. Or more likelY savings.

I used to be work for a large German financial advice firm, albeit the UK arm. And though it was 10 years ago, I do recall discussions about the savings ethos of young German recent graduates. The reason it was discussed as when the firm first came to UK, they got in trouble for selling endowments of all things to young single unemcumbered workers as a savings vehicle! The unnecessary life cover made it a mis-sale but I'm sure the excuse was that they had simply 'imported' the German financial advice model.

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I cant believe for one moment there are not vast amounts of Germans who had average jobs that havent got a pension that will cover their rent and able them to live beyond the a frugal existence.

It isnt a Utopia and the British system of having relatively affordable private housing as well as a huge amount of council housing up until the early 80s is the better way.

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The big difference is that Germans spend about 25% of their income on rent. It seems that it is more like 50% in the UK. They save the remaining 25% and tend to pay cash for things like cars and holidays and accumulate savings as well.

To the other theme, the rental market regime in Germany gives a lot of protections to tenants. In turn, this means that tenants stay in their homes for long periods of time (& years seems to be about average) and treat their houses as homes and have a strong sense of community. The protections given to tenants are also good for landlords as tenant turnover (which is expensive) is very low.

I like being a landlord in Germany and a tenant in the UK.

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Home ownership in the UK 67% verses 53% in Germany, both countries have a similar % and sit at the bottom of the table

http://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

The actual question is how do both german and Uk renters pay for there pensions

East Germany was communist not so long ago where all property was let by the state, presumably this is still the case in much of East Germany.

Thus a comparison vs home ownership in West Germany would be the better comparison.

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Home ownership in the UK 67% verses 53% in Germany, both countries have a similar % and sit at the bottom of the table

http://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

The actual question is how do both german and Uk renters pay for there pensions

In my opinion, this is the answer :

The big difference is that Germans spend about 25% of their income on rent. It seems that it is more like 50% in the UK. The Germans save the remaining 25% and tend to pay cash for things like cars and holidays and accumulate savings as well.

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