Are property-based pensions worthwhile?

A large number of banks, estate agents and other suppliers provide property-based pensions. But what does this term mean and what should property owners know about it? When do property-based pensions become worthwhile? And who is the appropriate contact partner?

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Annuitisation is a way of staying in one's own property in old age and releasing capital by selling it on an annuity basis. Sellers receive a right of residence registered in the land register and payment of the sale proceeds in the form of a lump-sum and annuity payment. Both payout models can be combined well. There are several variants for selling one's own property on an annuity basis. The contract can be negotiated individually. The agreements can thus be optimally adapted to the personal situation.

What pension models are possible?

Property owners can sell either on a life annuity or a term annuity basis. In a term annuity, the monthly pension agreed with the buyer is specified for a limited period of time. In a life annuity, the property owners receive the pension amount until their death. However, there are variations in both models, namely either temporary or joint and survivor life annuities.

In joint and survivor life annuities, the contractual agreement refers to more than one person. This does not apply only to civil partnerships and married couples. Children can also be added to joint and survivor life annuities. Here, the pension payment ends either with the death of the persons named in the contract, or a guaranteed period is agreed, so that the remaining family members can continue to receive payments after one of them has died.

Temporary life annuities are, in the proper sense of the word, a combination of life and term annuities. There is a set term for the monthly payments, but the payments cease if the contracting party dies.

When do property-based pensions become worthwhile?

Particularly in the case of life annuities, the property owner’s age is a key factor, as the buyer pays a lifelong pension payment. The statistical life expectancy (Mortality table of the German Federal Statistical Office) therefore affects the pension level. There are suppliers which only offer to purchase a property on a life annuity basis from a specific age onwards.

Selling property for pensions – advice from the pension professionals

There are many suppliers offering property-based pensions. For property owners considering selling their house or apartment for pensions, it is advisable to consult a regional expert. It is critical that the property be valued professionally and as soundly as possible. A regional estate agent knows the market in their region better than a country-wide online supplier. In addition, it can be helpful to obtain advice from various suppliers. However, the regional supplier of property-based pensions should be prioritised when making the final decision. A professional valuation based on local market knowledge allows you to ensure that the property is valued in line with the market.

Are you considering a property-based pension? We would be happy to advise you and determine together whether this option is the right choice for you.

 

Note
In this text, the generic masculine is used for better readability. Feminine and other gender identities are explicitly included to the extent necessary for the statement.

 

Legal note: This article does not constitute tax or legal advice in individual cases. Please have the facts of your specific individual case clarified by a lawyer and/or tax advisor.

 

Photo: © IgorTishenko/Depositphotos.com

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