How the pension is calculated
2 min.
This article was published on May 5, 2022 and may contain outdated information.
When pensioners hear about the concept of annuitization for the first time, they often cannot imagine how much they would actually receive for their own property. We explain roughly how the amounts for property annuities are calculated.
In order to determine how much a pensioner will receive for their property, it must first be valued using a professional procedure. The value determined in this process is the basis for the one-off payment and the monthly pension payments. In our example, we assume a property worth 500,000 euros.
Next, the pensioner must decide how high the one-off payment should be. As a general rule, the higher the one-off payment, the lower the monthly pension. However, if an investor only opts for a one-off payment without a monthly pension, they will still not receive the full value of the property. The usufruct value, i.e. what they would have to pay in monthly rent, is deducted from the sale price.
In our example, however, we assume that the pensioner decides to make a one-off payment of EUR 200,000 to pay off his mortgage directly and finance a long trip. In addition, a security value of 10 percent is deducted from the sale value.
The basis for calculating the pension is therefore EUR 250,000. The usufruct value is now deducted from this. The age of the pensioner is relevant here. In our example, we are dealing with a 70-year-old man. Statistically speaking, he will live for another 14 years and would therefore have to pay rent for 14 years. The expected remaining lifespan can be looked up in the mortality table of the Federal Statistical Office. The property could be rented out monthly for a value of 1000 euros. Interest is often added to the usufruct value at a certain rate. However, for the sake of simplicity, we will leave this out of our current calculation.
The usufruct value is therefore 168,000 euros. This leaves 82,000 euros for the pension payments, which are now also offset against the statistical life expectancy, i.e. divided over 14 years. This means that the pensioner would receive an additional pension of around 490 euros per month. An additional monthly payment is often agreed for the maintenance of the property.
In our example, the pensioner could receive much higher monthly payments with a lower one-off payment. It is therefore always advisable to look individually at the optimum ratio of one-off payment to monthly pension.
Rate your property now!
Free of charge | Non-binding
SAWALL REAL ESTATE
Kleinmachnow office
SAWALL REAL ESTATE
Berlin office