The Occupational Pensions Strengthening Act is on the way, with effect from 1 January 2018, this layer of pensions will undergo significant changes.
60 percent of all employees already benefit from occupational pensions, whether through employer benefits or through salary conversion. There are currently five ways to go:
- pension Fund
- provident fund
- pension funds
- pension plan
- direct insurance
As a rule, occupational pensions are covered by a life or pension insurance.
Especially the pension commitment hitherto carries a risk for the employer. In this way, he awards the employee a fixed pension, regardless of how the capital markets develop. In many GmbHs Zeitbombben should slumber, if the back covered by insurance contracts must come to pay. Due to the low-interest phase, the calculated profits for the guaranteed pension payment can not be achieved and the company has to refinance the difference.
Betterment of employees in salary conversion
In principle, every employee in Germany has a right to a company pension. However, the employer has the right to choose form and partner. If the employer does not offer a company pension, he must grant the employee the right to a direct insurance or pension fund in accordance with section 3.63 of the Income Tax Act in the context of salary conversion.
In connection with the pension guarantee, the first important change occurs. The sixth implementation path is now the “social partner model”. This model releases the employer from the liability for the pension amount. He only guarantees the amount of contributions paid.
They are mostly better-paid employees, who put on a company pension for old age. For low-income earners, salary conversion represents a financial hurdle, even if the contributions are taken from gross income. Thus they are free of social security contributions and income tax.
From January 2018, however, low earners will be promoted even more. The income ceiling is $ 2,200 gross per month. If employers support these employees with contributions for the occupational pension amounting to between $ 240 and $ 480 per year, the legislator subsidizes these contributions by 30 per cent. The employer therefore receives between $ 72 and $ 144 refunded.
From 2019 new regulation for social security contributions
Even if companies did not pay their employees any contributions to the company pension scheme, they nevertheless benefited from an employee’s decision to pay for salary. The employer saved his share of social security. This will change from 1 January 2019.
From the year 2019 employers will have to pass on a flat rate of 15 percent, the social contributions saved to the converted contribution, to the employee or the pension provider. This makes salary conversion even more profitable for low-income earners. Already today, however, the contribution to the company pension can be optimized.
The social benefits as well as payroll taxes are payable on the capital gains. These actually reduce the employer’s performance. However, if the employee converts the capital-building benefits into contributions to the company pension scheme, this ideally increases even the monthly net income.
Savings have almost doubled in this example, but net income remains the same. From 2019, the savings will rise again by 15 percent with the same income.
Due to the high tax advantages during the savings phase, occupational pensions are regarded as extremely lucrative forms of old-age provision, even if the future pension is taxed both downstream and is subject to health insurance. The savings during working hours exceed pension expenses.