Three pillars of retirement (Drei-Säulen-Modell)

Level 2 · Foundations

German termDrei-Säulen-Modell

Used byStatutory pension · Occupational pension (bAV) · Private provision (pillar 3)

Deep divesRetirement (Altersvorsorge)

Germany's Drei-Säulen-Modell (three-pillar model) separates retirement income into statutory, occupational, and private provision. The model is a map, not a promise that every person has all three pillars. Each pillar has different eligibility, funding, tax, access, portability, and risk, so retirement planning begins by inventorying them separately [1].

The three pillars

Pillar	German term	Main source	Core risk
1	gesetzliche Altersvorsorge	Statutory pension and related public systems	Career history, demographic and legislative change
2	betriebliche Altersversorgung	Employer-linked pension promises or funded arrangements	Plan rules, fees, employer changes, later tax and social charges
3	private Altersvorsorge	Personally arranged saving or insurance	Contributions, investment risk, fees, behaviour, product constraints

Pillar 1 is usually the base for employees, but it is not an individual investment account. Pillar 2 depends on employment and a specific plan. Pillar 3 is broad: it describes who arranges the provision, not one product.

Worked inventory

Nadia has a German Renteninformation, a small pension from a former employer, and an investment account intended partly for retirement.

Item	Pillar	Planning document
Statutory pension forecast	1	Renteninformation and insurance record
Former employer pension	2	Benefit statement and plan terms
Personal investment account	3	Account balance, costs, allocation, tax basis

Adding headline balances is not enough. Forecasts may be gross, payable at different ages, inflation-sensitive, or dependent on future contributions. Convert each item to the same date, price basis, and net or gross basis before comparing it with spending.

Why the model helps

The model prevents two errors: treating a statutory pension as a personal pot, and treating every private financial product as retirement provision. It also exposes concentration. A household relying on one employer plan faces different risks from one combining rights across several systems.

Check yourself

Which item belongs to pillar 1?

German statutory pension rightsAn employer pension promiseA personally arranged investment account

Which item belongs to pillar 2?

A bAV linked to employmentEntgeltpunkte in the GRVA private annuity bought individually

What does 'private' in pillar 3 establish?

That the product is automatically liquid and low-costThat the person arranges the provision outside statutory and occupational rightsThat investment risk is absent

Which adjustments are needed before combining pillar forecasts? Select all that apply.

Use a common price dateUse a consistent gross or net basisAlign payment ages and future-contribution assumptionsTreat every headline balance as monthly income

Sources

1. Bundesministerium für Arbeit und Soziales — Betriebliche Altersvorsorge and the three pillars, https://www.bmas.de/DE/Soziales/Rente-und-Altersvorsorge/Betriebliche-Altersversorgung/betriebliche-altersvorsorge.html (accessed 2026)
2. Bundesministerium für Arbeit und Soziales — Cross-pillar retirement information research, https://www.bmas.de/DE/Service/Publikationen/Forschungsberichte/fb527-konzeptionelle-grundlagen-fuer-saeulenuebergreifende-altersvorsorgeinformation.html (accessed 2026)