Pension, lump sum – or both?

Should you take the money from pillar 2 in the form of a monthly pension, as a lump sum, or a mixture of both?

You can have your pension fund benefits paid out as a one-off lump-sum payment, a monthly pension or a mixture of the two. This is an important decision which cannot be undone. Weigh up the advantages and disadvantages carefully and think above all about your flexibility and security.

When does a lump sum make sense and when is a pension the better option?

Pros and cons

Pros and cons

Lump-sum payment
You withdraw all your savings when you retire.

Lump-sum payment
You withdraw all your savings when you retire.

Pension
You receive a monthly pension until the end of your life.

Pension
You receive a monthly pension until the end of your life.

Pros and cons

Advantages

Lump-sum payment
You withdraw all your savings when you retire.

– More flexible financial planning because you can invest the capital as you wish.
– If you die, all of the remaining capital will pass to your heirs.
– Capital withdrawals are taxed at a reduced rate.

Pension
You receive a monthly pension until the end of your life.

– A secure, monthly income for the rest of your life.
– If you die, your spouse will receive a survivor’s pension, which is generally 60% of the original pension.
– You are secure thanks to independence from fluctuations on the financial markets.

Pros and cons

Disadvantages

Lump-sum payment
You withdraw all your savings when you retire.

– The amount is fixed and so you will not receive any further payment, however long you live.
– Invested capital is subject to investment risk and returns can fluctuate over time.

Pension
You receive a monthly pension until the end of your life.

– Not adjusted for inflation, so your pension may lose value over time.
– Your pension must be taxed as income.

More about the key advantages and disadvantages