Supplementary pension as part of the company pension scheme. Since 2002 every employee has been entitled to a company pension scheme through deferred compensation. However, this form of old-age provision is not always worthwhile.
Company pension schemes have a long tradition in Germany. In the classic case, the employer creates a reserve from which the company pensions for the retirees are paid. In this way, forward-looking entrepreneurs bind their employees to the company. If your employer offers you such a company pension, there is no question. You should definitely use this option. The situation is somewhat different with other forms of company pension schemes, in which the contributions are borne exclusively or in part by the employee.
Various forms of company pension schemes (bAV)
- -the supplementary pension is financed exclusively by the employer
- -the employee bears the burdens for the company pension alone
- -the employer pays part of the costs for the later supplementary pension
Company pension scheme through deferred compensation
These company pension models are increasingly common today. Since 2002, every employer has been obliged to offer its employees a company pension through deferred compensation. You should check carefully whether it is worthwhile for you to have part of your income converted into contributions to the company pension. Such supplementary pensions are usually only profitable when the insured reaches old age.
How does the deferred payment work?
As a rule, employers take out annuity contracts with an insurance company for their employees. These convert part of the salary into contributions for the company pension. You do not have to pay any taxes or social security contributions for this part of your income if the annual contribution does not exceed 4% of the assessment ceiling for pension insurance. The wages that you receive monthly are only slightly lower, and you still build up a supplementary company pension.
Contributions are due in retirement
The fact that the bill does not work out for every recipient of a company pension is due to the fact that you are asked to pay off by the tax authorities and the health insurance company in retirement. The health insurance contributions that are due to the company pension are particularly painful.
Company pensioners also pay the employer’s share for health and long-term care insurance in addition to the additional contribution and the employee’s share. Another disadvantage is that your statutory pension entitlements decrease, as you have paid fewer contributions to the statutory pension insurance due to the conversion of earnings.