Company pension as a supplement to the statutory pension insurance

Almost 20 percent of all 65-year-olds are at risk of poverty

Despite the high social spending in Germany, almost a fifth of all people aged 65 and over are at risk of poverty. The poverty hazard rate is defined as a proportion of people, the net income of which is less than 60 percent of the media annietto income of the total population. Many people deal with their retirement provision too late and do not adequately ensure sufficiently during their professional life. Pensions in Germany are based on three pillars: company pension schemes, statutory pension insurance and private provision. While the afflicted statutory pension insurance takes over the rules security function, private and company pension schemes serve as a supplementary provision. For a safe pension provision, the German pension insurance recommends that all three pillars for retirement provision.

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With the advancing demographic change, through which fewer and fewer workers have to finance more and more well -served beneficiaries, the statutory pension insurance is increasingly under financing pressure. Significant tax funds from the federal budget are already being spent on the financing of the statutory pension insurance. In 2022, the grant of the Federal Ministry of Labor and Social Affairs was already around 100 billion euros, and the trend is rising.

Company pension is a good addition to the statutory pension insurance

The company pension offers employees the opportunity to build additional pension provision for statutory pension insurance. With the most frequently used form of the company pension, direct insurance through deferred compensation, the employer takes out life or pension insurance for the employee. Part of the employee’s salary is paid directly into this insurance together with a grant from the employer. If the employer saves social security contributions through the deferred compensation, he is legally obliged to cover the measure through a pension fund, a pension fund or direct insurance with 15 percent. These contributions from the employer can be deducted from the tax as operating expenses. Regardless of their employment relationship, employees are entitled to deferred compensation for pension schemes, which also applies to trainees and part -time forces. However, a restriction applies to all employees bound.

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Gross or net conversion

An employee can choose either gross conversion or net conversion. In the case of gross conversion, part of the salary is deducted before taxes, and only after the tax burden in the net deflection. From 2023, contributions to deferred compensation are tax -free of up to eight percent of the contribution ceiling, which corresponds to an amount of 7,008 euros per year or 584 euros per month. Four percent are also free of social security, which corresponds to an amount of 3,504 euros per year or 292 euros per month. In addition, employees from 2023 have to convert at least EUR 254.63 or 21.22 euros per month. Employers benefit from gross conversion because they can save around 15 percent social security contributions. Therefore, employers must subsidize the contracts of the employees with 15 percent of the converted fee (up to the contribution ceiling), unless otherwise agreed. The biggest advantage of gross conversion is that the workers can reduce their taxable gross content by letting taxes before taxes and thus saving taxes and social security contributions. However, the net conversion can be combined with the Riester pension.

Editor finance.net

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