ETF: The pension decision shock – this is how you close the pension gap without giving up

When the pension notice lands in the mailbox, it is a sobering experience for many people. The document, which is sent annually to all insured persons aged 27 and over, makes a mathematical certainty visible: State insurance alone will not be able to ensure the usual standard of living in old age. Anyone who earns 3,000 euros net today often has to expect to earn less than 1,500 euros in old age. A gap that will not close without active action.

The system is reaching its limits

The foundation of German pension provision, the pay-as-you-go system, is under unprecedented demographic pressure. In the 1970s, the pension level was still over 55 percent. A “holding line” of 48 percent has been set for 2025. Projections suggest that this level could fall to around 46 percent by 2039. So if you don’t want to accept massive losses in retirement, you have to cover the difference of over 50 percent of your last net income from your own sources.

The figures from the Federal Statistical Office illustrate the severity of the problem. In 2024, 12.8 percent of pensioners between the ages of 65 and 74 were already working, and often not out of joy but out of financial need. The gender pension gap is a shocking 36.2 percent, due to interrupted employment histories and part-time work.

Source: Federal Statistical Office, 2024/2025

The state pension is changing from a standard of living guarantee to a basic pension. Experts recommend having around 80 percent of your last net salary available in retirement. The gap between the guaranteed 48 percent and the required 80 percent is the pressure to act that you must address today.

The mathematics of wealth creation

To effectively close this gap, you must defeat two enemies: inflation and taxes. Anyone who leaves their money in their current account suffers a gradual loss of purchasing power. A real increase in wealth requires investing in real assets and this is where stock ETFs (Exchange Traded Funds) come into play.

The power of compound interest

Compound interest is the strongest lever for long-term wealth creation. If you do not withdraw income but reinvest it (investment), these income will generate a return in the next period.

Simplified presentation without taxes, return 7% pa, monthly payment.

Diversification and tax framework

ETFs represent entire markets and, thanks to their broad diversification, offer a significantly better risk-reward profile than individual stocks. A globally diversified portfolio often contains over 1,500 companies from various industrialized countries and protects against the total failure of individual companies.

There are important adjustments in the tax framework: The savings allowance has been 1,000 euros per person (2,000 euros for married couples) annually since 2023. This allowance should be fully utilized every year. In the case of stock ETFs, 30 percent of the profits remain tax-free due to the partial exemption.

Why manual implementation often fails

If the theory is so clear, why can’t everyone build a solid portfolio? The answer lies in psychological and administrative hurdles. Managing a portfolio yourself means much more than just starting a savings plan.

• Rebalancing: If stocks and bonds develop differently, the risk profile shifts. Manual switching incurs transaction costs and triggers taxes every time
• FIFO tax trap: In Germany, shares bought first are sold first, i.e. usually those with the highest profits. This leads to the maximum tax burden when withdrawals are made
• Discipline: In falling markets, retail investors tend to change strategy, often at the worst possible time.
• Administration: Managing exemption orders, monitoring advance flat rates and preparing tax returns costs either time or money

At this point, the logic of digital asset managers beats manual portfolio management: They automate the entire process and ensure tax efficiency in the background.

Modern solution: Invest automatically with OSKAR

OSCAR² was designed to eliminate exactly these hurdles and make the process of wealth creation as easy as a checking account. It is not a classic insurance product, but rather a professional ETF asset management for families and long-term investors. Security is the top priority: your capital is with the partner bank and is legally considered Special assets. This means it is in case of bankruptcy of the bank or of OSCAR fully protected and still yours alone.

Use tax advantages intelligently

Particularly noteworthy is this OSCAR Black Status (from 50,000 euros): Here, profits at the end of the year are automatically realized in the amount of your exemption order. Shares are sold at a profit and bought again immediately, which increases the taxable purchase price and massively reduces the subsequent tax burden. Also integrated OSCAR An inflation protection component in every portfolio through gold ETCs and inflation-protected government bonds.

Family saving made easy

Each depot receives its own IBAN. This means that not only you, but also grandparents or godparents can deposit money directly, which is ideal for saving for children. While with classic insurance you often just pay off the agent’s commissions for years, your money flows into it OSCAR² in the market from day one.

The costs are transparent: 0.7 to 1.0 percent service fee pa plus around 0.14 percent ETF costs. According to BaFin studies, classic pension insurance policies have effective costs of 1.8 to 2.7 percent, with significantly less flexibility.

The insurance trap: Why flexibility is crucial

Many investors flee into insurance contracts out of fear of the stock market risk. But consumer advice centers warn: Private pension insurance is often a bet on your own life that rarely works out in favor of the insured. The biggest mistake in thinking is not in the savings phase, but in the withdrawal moment.

Insurance companies require the entire capital at the start of retirement and convert it into fixed monthly payments. Unfortunately, if you die early, your capital is often lost. The ETF-based payout plan is becoming increasingly important in modern financial planning because it offers three decisive advantages:

• Capital preservation: If your portfolio generates an average return of 5% and you only withdraw 4%, your assets will continue to grow even in retirement
• Complete inheritability: The assets remain in your portfolio. In the event of death, it goes directly to your heirs – instead of disappearing into the insurance collective
• Flexible access to capital: If you need a large sum once, for example for renovation or medical costs, you can access it at any time. If inflation rises, you can simply increase your payout rate via the app

Conclusion: From fear to action

The sooner you act, the lower the monthly expense will be. If you start at the age of 27, you only need around 50 euros per month for an additional capital of 100,000 euros with a 6% return. If you start at 47, you already have to raise around 230 euros.

The combination of well-founded theory, i.e. ETFs, compound interest, diversification and automated implementation via a robo-advisor like OSCAR allows you to close your supply gap without dedicating your life to financial analysis.

Instead of irrevocably transferring capital to an insurance company, you retain full control with a modern payout plan – liquid, tax-optimized and inflation-protected.

Because doing nothing is the most expensive of all options. With a savings plan starting at 25 euros per month, you are laying the foundation for a retirement that is characterized by freedom instead of sacrifice.

FAQ: Frequently asked questions about ETF retirement planning

Is my money with a robo-advisor like OSCAR secure? Yes. Your securities are held by a German custodian bank and are legally protected as special assets. Neither OSCAR nor the custodian bank have access to your capital in order to service their own liabilities. In the event of bankruptcy, your deposit can simply be transferred to another bank.

When does an ETF savings plan become worthwhile for retirement? An ETF savings plan is worthwhile even for small amounts (at OSCAR² from 25 euros per month). The crucial factor is time: the earlier you start, the more compound interest will work for you. An early start often even compensates for a lower savings rate.

What happens to my money if I die in retirement? Unlike a classic pension insurance, your capital does not expire. Since the money is in your personal portfolio, it is completely inheritable. Your surviving dependents will receive the entire existing deposit assets.

²Note: Oskar is a brand of Oskar.de GmbH, a spin-off of finanzen.net GmbH. Scalable Capital Vermögensverwaltung GmbH manages the assets, Baader Bank AG manages the securities accounts with clearing accounts. Further information can be found here.