How does an immediate annuity work in Germany?

Published examples from insurers and comparison sites in Germany, 2026.

You pay in a single amount, for example from a matured life policy, the sale of a house or an inheritance. The insurer converts it into a monthly pension based on your age and life expectancy and usually starts paying the following month, until you die.

Part of the pension is guaranteed. A further part comes from bonuses the insurer earns; these can rise or fall, while the guarantee stays.

The older you are when you start, the higher the pension, because the insurer expects to pay for fewer years.

At 340 euros a month you get 100,000 euros back after about 24.5 years, at 380 euros after just under 22 years. If you start at 65, you need to reach about 87 to 90 just to see your money again. According to the official German life table, men aged 65 live on average about 18 more years, women about 21.

As an investment, an immediate annuity is therefore a poor deal for many people. Its value lies elsewhere: it still pays at 95 or 100, when your own withdrawal plan would long be empty. You are buying security against a very long life, not a return.

Without extras, the pension ends when you die and the remaining money stays with the insurer. Two options change that. A guarantee period (Rentengarantiezeit) keeps paying for a fixed number of years even if you die earlier. A capital refund (Kapitalrückgewähr) pays your heirs what is left of the lump sum.

Both reduce the monthly pension. A capital refund costs noticeably more than a short guarantee period. Ask for both versions and compare the guaranteed pension side by side.

The pension is taxed in Germany as long as you live here. If you later move abroad, the double tax treaty with your new country decides where it is taxed. Ask about this before you sign if a move is likely.

Contracts and documents are usually only in German. Have the guaranteed amounts and the death benefit confirmed in writing so you know exactly what you are buying.

If your state and company pensions already cover your fixed costs, you hardly need the extra guarantee. Investing part of the money flexibly and withdrawing as needed gives you more room.

It also rarely fits if your health is poor or you want to pass on as much as possible. Always keep a reserve for care, home adaptations or repairs: a lump sum once paid in can usually not be taken back.