Private pension insurance is a self-reliant old-age provision with which you can close your personal pension gap. With a private pension insurance you secure the right to a guaranteed pension for life - no matter what age you reach.

The state alone can no longer guarantee this security, because the number of people paying into the statutory pension system is growing year by year. Statutory pensions and civil servants' pensions will therefore have to be reduced more and more in the coming years. For you, this means more personal responsibility in financial life planning, but also more opportunities to shape your old-age provision according to your own plans and wishes.

As a customer, you have the choice of how you want to structure your insurance cover in detail. Decide between a deferred annuity insurance, an immediate annuity or an annuity insurance with a lump-sum option.

Deferred, immediate or with a lump-sum option
You pay regular monthly contributions into a deferred annuity insurance during your active working life, and in return you receive the contractually agreed pension plus surplus participation for life in retirement.

The immediate annuity is particularly attractive for best-agers over 60: you pay in a larger sum of money once, and the regular annuity then starts immediately.

In the case of annuity insurance with a lump-sum option, you are free to choose between a lifelong annuity and a one-time high lump-sum payment upon retirement.

Unlike the statutory pension, where the contributions of the insured already flow back to the pensioners the next month, your contributions to the private pension insurance are accumulated for you personally and later paid out to you plus a guaranteed interest rate for life.

A future risk, like that of the statutory pension, therefore does not exist with private pension insurance.

More flexible than Riester or Rürup products
Unlike life insurance, no health check is required when taking out a private pension policy. Due to the possibility of a lump-sum option, the private pension is more flexible than pension products according to the Riester or Rürup model: When you retire, you can choose between a lifelong pension and the payment of the saved capital in one sum.

Private pension insurance also offers the possibility of agreeing additional risk protection in the same contract, such as occupational disability insurance, accident protection or survivors' cover.

A private pension insurance is suitable for almost everyone. The deferred variant is primarily tailored to younger or middle-aged people who want to provide for their old age regularly and over a longer period of time while at the same time paying favourable premiums.

If you can invest a larger amount of money - for example from a life insurance policy, a bank investment or an inheritance - in your own provision, you can consider the deferred annuity for a single premium or - depending on your age - also an immediate annuity.

If you want to remain flexible in retirement because, for example, you are planning to buy a retirement home in the sunny south, you can also secure immediate payment of the pension in one lump sum by taking out a policy with a lump-sum option.

Unlike the Riester or Rürup pension, contributions to private pension insurance policies concluded after 31 December 2004 can no longer be claimed as special expenses for tax purposes.

The contributions to your private pension are therefore paid out of your net income. However, this does not have to be a disadvantage - because only a small portion of the later pension payments will be taxed. Because the personal tax rate in old age is usually significantly lower than during active employment due to the loss of earned income, there are often even tax advantages.

Special case: lump-sum payment
If you choose a private pension with a lump-sum payout, you must pay full tax on the income if the policy was taken out after 2004. "Income" is the difference between the premiums you paid in and the sum insured paid out - similar to the interest you earn on an investment at the bank.

Tip: If you have your capital paid out only after you have reached the age of 62 (if you took out the policy before 01.01.2012 at the age of 60) and after twelve years have elapsed, you even only have to pay tax on half of the income.

Private pension insurance, Riester or Rürup pensions, life insurance, unit-linked pension products - the variety of pension options on offer often seems confusing. However, it is clear to everyone that private pension provision on one's own is absolutely necessary today.

Play it safe with good advice
If you have decided to close your personal pension gap privately, you will find yourself confronted with a multitude of providers, products and tariffs.

You should not make a hasty decision in favour of a specific offer. Taking out a private pension online is not recommended - the subject is complex and you need to pay attention to the details.