Small businesses and low-income earners in particular are set to benefit: The craftsmen’s association welcomes the new company pension scheme.
Politicians have been wrestling with the bill for a long time, but now the coalition has agreed on a compromise. The planned Company Pension Strengthening Act is intended to make company pension plans more attractive, especially in small companies and for low-wage earners. It happened on 1. June passed by the Bundestag.
The German Confederation of Skilled Crafts (ZDH) has commented positively on the law. It is good and right that the Company Pension Strengthening Act expands funded company pension plans, emphasized ZDH Secretary General Holger Schwannecke. The company pension scheme offers many advantages and is now being subsidized even more by the state. For example, the administrative and acquisition costs are often lower than for a private pension plan. In addition, contributions to the company pension scheme for companies and employees alike are generally up to 3.048 per year free of tax and social security contributions, explained Schwannecke: “However, it must be remembered that the company pension is taxable when it is paid out and that those with statutory health insurance then have to pay the full contributions to health and long-term care insurance.”
The ZDH also welcomes the increase in the maximum tax-free contribution to eight percent of the contribution assessment basis for statutory pension insurance. On the other hand, he is critical of the introduction of a mandatory employer subsidy for deferred compensation, as it could place an additional burden on companies compared to the current legal situation.
“Whether one provides for operationally or privately, everyone must decide in the long run itself ?, says Holger Schwannecke. However, comprehensive advice, for example from the pension funds of the skilled crafts sector, is recommended. “In any case, everyone should deal with the issue. Because the biggest mistake you can make when it comes to old-age provision is not making provisions for it.”
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The most important facts!
- The federal government relies on the so-called social partner model. Trade unions and employers should in future be able to agree on company pensions – without the employer being liable for their amount.
- Accordingly, there will be no minimum or guaranteed benefits for employees, as these have so far been the “main stumbling block preventing small companies in particular from offering a company pension scheme”, emphasized Federal Labor Minister Andrea Nahles in her speech to the Bundestag.
- Employers and employees not bound by collective bargaining agreements can agree that the relevant collective bargaining agreements should also apply to them.
- Die Arbeitgeber sind zu einem Zuschuss von 15 Prozent des Sparvertrags verpflichtet, wenn ihr Mitarbeiter einen Teil seines Gehalts in eine selbstfinanzierte Betriebsrente umwandelt. This is roughly equivalent to the amount that the employer has so far saved in social security contributions through deferred compensation. From 2018 (for new contracts) and 2022 (for existing contracts), the employer will no longer benefit from these savings, but the self-financed company pension scheme will.
The state also subsidizes employer-financed supplementary contributions to the company pension for employees with incomes below 2.200 euros gross. The additional contribution must be between 240 and 480 euros per year. The state subsidy on this amounts to 30 percent. It is offset directly against income tax via the employer.
- In addition, the limit for tax-free payments into company pension plans is to be raised to up to eight percent of the contribution assessment ceiling for statutory pension insurance. In 2018, this corresponds to around 6.000 euros instead of the current four percent limit plus 1.800 euros for new commitments.
- Those who receive basic benefits in old age will in future be exempt from tax on voluntary supplementary pensions up to 202 euros.
- In addition, the annual basic allowance for the Riester pension will be raised from the current 154 to 175 euros.
- The German Pension Insurance is to act as a neutral body providing information on the options available for occupational pension plans. It has set up a free service telephone number 0800/ 1000 4800. The ZDH recommends that its companies seek advice from the pension funds of the skilled crafts sector.
Why the ZDH is positive about the planned law to strengthen company pensions?
ZDH Secretary General Holger Schwannecke explains in an interview.
Holger Schwannecke (Photo: © ZDH/Stegner) DHB: Things quickly get complicated when it comes to company pension schemes. Why should you bother with it anyway?
Schwannecke: Because company pension plans offer many advantages and will be subsidized even more by the state in the future: With the Betriebsrentenstarkungsgesetz (Company Pension Strengthening Act), which is to be passed this week in the Bundestag, employers will be better off in terms of taxation if they pay between 240 and 480 euros a year into the company pension scheme for low-income earners employed by them. Low-income earners are those with a gross income of less than 2.200 euros a month. In addition, company pensions of up to 202 euros are to be exempt from the basic old-age pension scheme and tax-free payments to direct insurance, pension funds and pension funds are to be increased.
DHB: What other advantages does the company pension plan offer, what do you need to consider??
Schwannecke: Administration and acquisition costs are often lower than for private provision. In addition, contributions to the company pension scheme for companies as well as employees are in principle up to 3.048 Euro per year tax and social security free. It should be remembered, however, that the company pension is taxable when it is paid out and that those with statutory health insurance then have to pay the full health and long-term care insurance contributions.
DHB: What alternatives are there besides company pension plans??
Schwannecke: In addition to occupational pensions, the Riester pension, for example, remains interesting, especially since the Occupational Pensions Strengthening Act also provides for an increase in the Riester basic allowance. In the end, it’s up to each individual to decide whether to make private or company provisions. In any case, everyone should deal with the issue. It is therefore advisable to obtain comprehensive advice, for example from the Versorgungswerke des Handwerks (pension funds for the skilled trades). Because the biggest mistake one can make in old-age provision is not to provide for it.