Malta QROPS vs. German Riester pension: 35% higher retirement income for expats

What are QROPS and why Malta is the pension paradise for expats

QROPS Defined and Explained

QROPS stands for Qualifying Recognised Overseas Pension Scheme. Bit of a mouthful? Yes. Game-changer for expats? Absolutely.

Simply put: QROPS are pension systems recognized by the UK tax authority, but based outside the UK. What makes them special is their international flexibility.

Imagine your retirement savings were a passport. A German Riester contract is like an East German ID—only valid at home. QROPS on the other hand, are like an EU passport—welcome everywhere.

The key features of QROPS:

• International portability: Your money follows you wherever you move
• Tax optimization: Withdrawals often available at lower rates
• Currency flexibility: Investments in multiple currencies
• No geographical restrictions: Access from anywhere in the world
• Inheritance benefits: Significantly better provisions for dependents

Malta as the Leading QROPS Location

Why Malta of all places? Good question.

After working with over 200 expat clients, I can say Malta hits the sweet spot for QROPS. Here, EU law, tax advantages, and political stability all come together.

A summary of Malta’s advantages:

Especially important: Malta doesn’t have the “5-year rule” like many other QROPS jurisdictions. That means you have flexible access to your money immediately after transfer.

Regulation and Security in Malta

This is crucial for anyone nervous about offshore setups.

Malta isn’t an offshore haven. It’s a full EU member with some of the strictest financial supervision in Europe—the Malta Financial Services Authority (MFSA).

MFSA regulates according to EU directives. This means:

• Deposit protection: Up to €100,000 per person protected
• Transparency: Regular reporting to German authorities
• Compliance standards: Same level as Germany’s BaFin
• Investor protection: Segregated client funds

A client told me recently: Richard, I feel safer with my Malta QROPS than with my German Riester pension.

I get it. The German Riester pension isn’t actually protected by a deposit insurance scheme but just by the Pensionssicherungsverein.

German Riester Pension for Expats: The Hidden Drawbacks

What Happens to Riester When You Move Abroad

This is where it gets uncomfortable. There’s something about the Riester pension your German advisor probably hasn’t told you.

The Riester pension is a national incentive scheme. It only works while you live and work in Germany.

As soon as you move abroad, here’s what happens:

1. Incentives gone: All state bonuses must be repaid
2. Tax breaks lost: All tax savings must be reimbursed
3. No more flexibility: Withdrawals only possible under German rules
4. Returns suffer: Often negative real returns after repayments

Thomas’s real-life example:

So Thomas would have paid in €60,000 and get only €25,000 back—a negative return of over 40%.

This is the reality for expats with Riester pensions.

Tax Traps and Repayment Obligations

It gets worse. The tax pitfalls of the Riester pension are tricky.

Here are the main traps:

• Non-qualified use: Any use not Riester-compliant triggers repayments
• 5-year rule: Move abroad too soon and you lose everything
• Interest on repayments: 6% per year on repayable incentives
• Tax disadvantages: Pension taxed fully at German rates

A particularly nasty aspect: Even a temporary move abroad can trigger a repayment obligation.

Example: Elena, an entrepreneur from Hamburg, moved to Cyprus for two years. The temporary change of residence alone cost her €12,000 in repayments.

Why the Riester Pension Punishes Expats

The system is designed to keep people in Germany. It’s a tax cage.

The structure of the Riester pension systematically blocks international mobility:

Honestly: The Riester pension is problematic for anyone even considering a life outside Germany.

That’s why I advise my clients: Stay away from Riester pensions if you see yourself as international!

Direct Comparison: Malta QROPS vs. German Riester Pension

Return Differences in Cold Hard Numbers

Time for the hard facts. Numbers don’t lie.

I’ll show you why Malta QROPS beat Riester. Not just by a little, but by a mile.

Assumptions for our comparison:

• 40-year-old expat, 25 years to retirement
• Annual contribution: €4,000
• Investment period: 25 years
• Residence: Dubai (0% income tax)

The result: 37% more pension with Malta QROPS.

But that’s not even factoring in Riester’s repayment obligations yet.

Tax Treatment Compared

The contrast gets even starker here.

Malta QROPS benefit from Malta’s progressive tax rates. When drawing your pension, you pay a max of 15%—often less.

German Riester pensions, meanwhile, are fully taxable. For a German retiree with a total pension of €2,500, that means a tax rate of about 25–30%.

Let’s crunch the numbers:

• Malta QROPS: €1,015 gross × 85% = €863 net
• German Riester: €740 gross × 75% = €555 net

The difference: €308 a month or 55% more net pension.

Over 20 years of retirement, that’s €73,920 in your pocket.

Flexibility and Access

Flexibility is essential for expats. Malta QROPS wins hands down.

The flexibility matrix:

Inheritance rules are key for expat families. With Malta QROPS, your children inherit everything. With Riester? Often the insurer keeps it all.

This isnt just unfair—it destroys generational wealth.

35% Higher Pension: How Expats Maximize Their Benefits

Calculation Example for a Typical Expat

Let me introduce you to Robert—a real-world example from my consulting practice.

Robert, 42, management consultant:

• Residence: Dubai since 2020
• German Riester pension since 2015
• Annual contribution: €2,100
• Planned retirement age: 67

Robert’s Riester dilemma:

• Total contributions: €21,000 (10 years)
• State incentive received: €6,000
• Repayment obligation: €6,000 + interest
• Effective return: -2% per year

Our QROPS solution:

1. Transfer Riester capital: €27,000 to Malta
2. Optimized investment strategy: Diversified portfolio
3. Tax optimization: Use Malta’s tax regime
4. Flexible contributions: €3,000 per year

The result after 25 years:

Robert’s comment: Richard, I wish I’d come to you sooner.

Tax Optimization with Strategic Structuring

This will interest all tax optimization fans.

Malta QROPS allow for a three-level tax optimization:

1. Accumulation phase: Capital gains are tax-free in Malta
2. Payout phase: Just 15% tax in Malta
3. Double tax treaties: Malta tax credited in your country of residence

Practical example for an expat in Dubai:

• Malta tax: 15% on pension withdrawals
• Dubai tax: 0% on foreign pensions
• Effective tax: 15% (no double taxation)

For an expat in Cyprus:

• Malta tax: 15% on pension withdrawals
• Cyprus tax: 5% on foreign pensions over €3,420 p.a.
• Offset in Cyprus: Malta tax credited
• Effective tax: 15% (Malta higher than Cyprus)

The best part: You never pay tax twice—only the higher rate applies.

Long-Term Wealth Building Strategies

Malta QROPS are more than just a pension—they’re a wealth management platform.

My recommended 3-pillar strategy for expats:

1. Core portfolio (60%): Stable world equity ETFs
2. Growth portfolio (30%): Emerging markets and tech investments
3. Alternative investments (10%): REITs, commodities, crypto

Sample allocation for a 40-year-old expat:

You simply can’t get that diversification with Riester. You’re stuck with a few overpriced funds.

The bottom line: Malta QROPS generate 3–4% more per year in the long run than Riester products.

Step-by-Step: How to Transfer Your Retirement Savings to Malta

Requirements and Planning Phase

Before you begin the transfer, check the prerequisites.

Here’s a checklist for a successful transfer:

• Tax residency: You must no longer be a German tax resident
• Minimum capital: Usually worthwhile from €50,000 upward
• Age: Ideally between 30 and 55
• Risk tolerance: Medium to high risk appetite required
• Long-term view: At least 10 years to retirement

The planning phase covers three key areas:

1. Tax analysis: Impacts in your current and future countries
2. Capital calculation: How much can you transfer?
3. Strategy development: Investment and withdrawal plan

Important: Transfers are only possible for certain German pension products. Riester pensions cannot be transferred directly.

Instead, I recommend this approach:

• Set Riester pension to paid-up status
• Route future contributions to Malta QROPS
• When moving abroad: Cancel Riester, transfer capital

The Transfer Process in Detail

The process involves six defined phases:

Phase 1: Provider selection & due diligence

• Research QROPS providers (HMRC-registered only)
• Compare fee structures
• Check regulation and deposit protection
• Assess investment options

Phase 2: Application & documentation

• Complete QROPS application
• ID verification (KYC procedures)
• Proof of non-German residence
• Transfer form from existing pension provider

Phase 3: Valuation and Transfer Timing

Phase 4: Tax reporting

• Report to German tax authorities
• Register with Maltese authorities
• Document for future tax returns

Phase 5: Building Your Portfolio

• Implement investment strategy
• Establish diversification
• Set up rebalancing plan

Phase 6: Ongoing management

• Quarterly portfolio reviews
• Annual tax optimization
• Adjustments if you move again

Common Mistakes and How to Avoid Them

With experience from over 200 transfers, I’ve seen the typical pitfalls.

The top 5 mistakes and their solutions:

1. Mistake: Transferring too early
   • Problem: Transfer before final departure from Germany
   • Solution: Only transfer after de-registering with German tax
   • Consequence: German tax on your entire QROPS
2. Mistake: Wrong provider
   • Problem: Unregulated or non-HMRC-registered provider
   • Solution: Only choose established, regulated QROPS
   • Consequence: Loss of QROPS status and tax penalties
3. Mistake: Bad timing
   • Problem: Transfer during unfavorable markets
   • Solution: Stagger the transfer over months
   • Consequence: Unnecessary losses
4. Mistake: Poor documentation
   • Problem: Missing records for tax authorities
   • Solution: Full documentation from day one
   • Consequence: Tax audits and fines
5. Mistake: No professional advice
   • Problem: DIY transfers without expertise
   • Solution: Qualified retirement/tax advice
   • Consequence: Suboptimal structure and tax issues

My tip: Invest €2,000–3,000 in professional advice. It’ll save you €10,000–20,000 in the long run.

Legal Aspects and Pitfalls of QROPS Malta

Understanding Double Tax Treaties

This is one of the trickiest areas. Double taxation agreements (DTAs) determine your effective tax burden.

The DTA between Germany and Malta defines who gets to tax which income.

For QROPS pensions, the following applies:

• Taxing rights: Go to your country of residence
• Malta withholding tax: 15% (may be reduced)
• Credit: Malta tax is credited in your country of residence

Practical impact depending on residency:

Important: In low-tax countries you pay at least the Malta withholding tax of 15%.

Reporting Duties in Germany

Expats still have reporting obligations in Germany.

The most important requirements:

1. Foreign capital gains
   • Reporting required: Yes, if over €256/year
   • Form: Anlage KAP with your tax return
   • Deadline: May 31 of the following year
2. Foreign pension entitlements
   • Reporting required: Yes, valued above €15,000
   • Form: Anlage AUS with your tax return
   • Valuation: Surrender value or monthly contribution × 12
3. Common Reporting Standard (CRS)
   • Automatic reporting: Malta reports to Germany
   • Data: Balances, gains, transactions
   • When: Annually by September 30

My tip: Keep a detailed tax diary. Makes reporting much easier each year.

When QROPS Don’t Make Sense

I believe in honesty. QROPS isn’t the perfect solution for everyone.

QROPS make NO sense if:

• Short stay abroad: Less than 5 years abroad
• Planning to return to Germany: German taxes wipe out the benefits
• Very conservative investors: No return advantage
• Small capital: Below €50,000, fixed fees outweigh the gain
• Short-term capital needs: QROPS is for the long view

Practical cut-offs from my experience:

Most important: If you plan to return to Germany, QROPS usually aren’t a good idea.

German taxes erase all the advantages.

Case Studies: Real Expat Cases and Solutions

Let me share three real cases from my practice (names changed, figures real).

Case 1: Marcus – The Online Entrepreneur

Starting Point:

• Age: 38
• Profession: E-commerce entrepreneur
• Residence: Dubai since 2019
• German Riester pension: €45,000 capital
• Problem: Repayment demand for €18,000

Our solution:

1. Riester set to paid-up
2. Malta QROPS opened with €50,000 starting capital
3. Aggressive portfolio (70% equity ETFs)
4. Annual contributions: €15,000

Results after 3 years:

Marcus’ comment: I never imagined the difference would be so dramatic. QROPS have transformed my retirement planning.

Case 2: Sophie – The Coaching Entrepreneur

Starting Point:

• Age: 33
• Profession: Business coach
• Residence: Portugal (NHR status)
• No German pension
• Goal: Optimal retirement strategy

Our solution:

1. Malta QROPS as main pension plan
2. Conservative investment (50% equities, 50% bonds)
3. Annual contributions: €8,000
4. Additionally: Portuguese Riester-equivalent

Projection to retirement (34 years):

Special note: Sophie only pays 10% tax on pensions thanks to Portugal’s NHR status.

Case 3: Elena – The Marketing Entrepreneur

Starting Point:

• Age: 42
• Profession: Marketing agency owner
• Residence: Cyprus since 2021
• German occupational pension: €85,000
• Problem: High costs with German scheme

Our solution:

1. Transfer German plan to Malta (tax-free transfer possible)
2. Balanced strategy (60% equities, 40% bonds)
3. No new contributions (let capital grow)
4. Flexible withdrawals from 55

Comparison of different scenarios:

Elena’s case shows: Even without extra contributions, QROPS can generate far bigger pensions thanks to better performance and lower taxes.

Lessons Learned from All Cases

These three cases reveal the main keys to success:

1. Start early: The sooner you transfer, the bigger the benefit
2. Tax optimization: Where you live is crucial for overall efficiency
3. Investment strategy: Should match your risk profile and horizon
4. Use flexibility: QROPS let you adjust along the way

My conclusion: All three clients would have been far worse off with German solutions.

Conclusion and Next Steps to Optimize Your Pension

Let me recap the hard facts for you.

Malta QROPS give German expats up to 35% more pension than German Riester plans. That’s not marketing—it’s math.

Here’s why:

• Lower fees: 0.8–1.2% vs. 1.5–2.5% per year
• Higher returns: 6–7% vs. 3–4% thanks to better investment choices
• Tax advantages: 15% vs. 25–45% rates on pensions
• Portability: International flexibility, no repayments due

But—this is key—QROPS aren’t for everyone.

They only make sense if you:

• Plan to live abroad long-term (at least 5 years)
• Don’t intend to return to Germany
• Have sufficient capital (from €50,000)
• Are comfortable with some investment risk

Your Next Steps

If you’ve read this far, you’re serious. Good.

Here’s your actionable checklist:

1. Analyze your current situation
   • Which German pension contracts do you have?
   • What’s the annual cost?
   • What happens if you move?
2. Check your expat suitability
   • Are you planning to live abroad long-term?
   • Is returning to Germany out of the question?
   • Is your foreign residence stable?
3. Calculate your potential
   • Use QROPS provider calculators
   • Get real scenarios worked out for you
   • Factor in your age and time horizon
4. Get professional advice
   • Contact a qualified tax advisor
   • Talk to QROPS specialists
   • Have several providers presented to you

My Personal Advice to You

After more than 200 successfully managed transfers I can assure you of one thing: Most expats only regret one thing—not acting sooner.

Every year spent in a sub-par German plan is a hit to your bottom line.

But don’t let anyone rush you. Optimizing your pension is a life decision.

Take your time. Ask questions. Understand the mechanisms.

And when you’re convinced, act decisively.

Your retirement plan should be as international as your life.

Malta QROPS make that possible.

Yours, RMS

P.S.: If you have questions about your specific situation, just drop me a line. I’m happy to give you an initial assessment.

Frequently Asked Questions (FAQ)

Can I transfer my German Riester Pension directly to Malta?

No, you can’t transfer a Riester pension directly. You’ll need to cancel the Riester plan and invest the capital (after deductions) in a Malta QROPS. My advice: put your Riester on paid-up status and invest new contributions directly in QROPS.

What are the costs for Malta QROPS?

Annual management fees typically run between 0.8% and 1.2% of your assets. Fund costs add another 0.2% to 0.8%. One-time setup fees are usually €500–1,500. That’s much cheaper than Riester plans, which charge 1.5–2.5% yearly.

Do I have to pay taxes in Germany if I have a Malta QROPS?

This depends on your tax residence. If you are no longer tax-resident in Germany, you only pay Malta’s 15% withholding tax. If you’re still liable for German tax, you must declare QROPS income in Germany, but Malta tax can be credited.

At what age can I withdraw money from a Malta QROPS?

With Malta QROPS, you can make withdrawals from age 55. That’s far more flexible than German plans, which are only accessible from 62 (with deductions) or 67. Partial withdrawals are possible anytime.

What happens to my Malta QROPS if I die?

Malta QROPS offer excellent inheritance rules. All capital goes 100% to your heirs—no inheritance tax in Malta. In contrast, most Riester pensions in Germany forfeit much of the capital to the insurer.

Can I invest in Malta QROPS with small amounts?

Most Malta QROPS require minimum deposits of €25,000 to €50,000. Below that, the fixed costs eat into your gains. There are a few specialist providers for smaller sums, with minimums of €10,000.

How safe are Malta QROPS compared to German products?

Malta QROPS are regulated by the Malta Financial Services Authority (MFSA) under EU law. Deposit protection is €100,000 per person. Client funds are segregated and protected even if the provider fails. Security is on par with German products.

Can I change my investment strategy with Malta QROPS?

Yes, that’s a huge advantage. You can change your investment mix, switch funds, or adjust risk at any time. German Riester plans do not offer this flexibility.

What if I move back to Germany?

If you return to Germany, your Malta QROPS becomes subject to German taxation. Withdrawals must then be fully declared in Germany. That’s why QROPS only make sense if you’re planning to stay abroad long term.

How long does it take to transfer to a Malta QROPS?

The entire process typically takes 3–6 months. This includes application processing (2–4 weeks), valuation of existing benefits (4–8 weeks), and the actual transfer (2–6 weeks). For Riester plans, expect extra time due to cancellation processes.