Pension, lump sum or both?

Choosing how to have your retirement savings paid out is a once-in-a-lifetime decision

Should you have your capital paid out as a lump sum or gradually as a pension for the rest of your life? Andreas was also faced with this key question.

At the start I had no idea what my options were, but carefully weighing them up really helped.

Andreas W.

Pension or lump sum

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Careful examination of whether to opt for a lump-sum payment or a regular pension brings important factors to light. Andreas wanted to reach a conclusion based on the facts:

The advantage of a regular pension compared to a lump-sum payout is that you’ll receive a fixed amount every month until the end of your life, even after your retirement capital has been exhausted.

However, a pension is not protected against inflation, and the whole amount is also subject to income tax.

With the combined option, the capital in a retirement fund is split, i.e., one portion of the capital is paid out as a fixed pension, the other as a lump sum. The combined option allows you to benefit from the advantages of both variants: the security of a regular pension with the flexibility of a lump-sum capital payment. You should bear in mind, however, that receiving a capital payment comes with increased personal responsibility because you have to manage the sum yourself. The exact ratio between pension and capital payment must always be assessed on an individual basis. This was a decision Andreas also had to make.

Our top 3 tips

Use the rule of thumb

As a general rule, your income from pensions and investments should cover your fixed costs and regular expenses. Our budget calculator will help clarify your personal financial situation.

Reduce taxes with phased payments

By having your occupational pension and your private retirement savings paid out over a number of years rather than in the same year, you can normally reduce your tax burden.

Register the withdrawal in good time

The registration deadline for capital payouts varies according to the retirement fund. For some, it’s up to three years before retirement.


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Useful information on having your retirement assets paid out.

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