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What Are Capital Formation Benefits

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Defined asset-forming benefits

Asset-forming benefits are payments from the employer that are intended to help the employee build up assets. Employees and civil servants such as civil servants, judges or soldiers can receive up to USD 40 per month, it may change. Government grants are also possible. All capital-forming benefits are paid directly into a form of investment determined by the employee and are not paid out directly to the employee. The capital formation benefits are voluntary benefits by the employer, but can be part of an employment or collective agreement. In some cases, the employer can also top up the payments out of pocket. This can be useful in order to receive the maximum possible state subsidies.

First in first, you need to clarify whether you are entitled to capital formation benefits. To do this, take a look at your employment contract and, if applicable, the applicable collective agreement. There is no statutory right to capital formation benefits. They are an additional and voluntary service by the employer to build up the employee’s assets. As such, however, capital-building benefits can be part of your employment or collective bargaining agreement. Corresponding company agreements are also possible.

The situation is different with the entitlement to state subsidies for capital formation benefits (employee savings allowance). You are only entitled to this if your taxable monthly income is below a certain limit.

What is the duration of capital formation payments?

The contracts run for seven years. The first six years are paid in, then the money is dormant for a year. The money will only be available to you after the lock-up period of seven years has expired. An exception is building society savings with capital-forming benefits, where payments are made over the full seven years.

Also the saving is possible in various forms of investment. Risks, potential returns and the requirements for or the amount of government subsidies vary.

  • Pay off real estate loans with capital building services
  • The home loan and savings contract with capital-building benefits
  • The bank savings plan with capital-building benefit
  • Investing capital-forming benefits: the fund savings plan

Are capital-building services taxed?

Capital-forming benefits are part of your gross income and as such are also taxed and levied. However, this does not reduce the deposits, but your net income. The amount of taxes and duties depends on your personal income and living conditions.

THE EMPLOYEE SAVINGS ALLOWANCE FOR LOW WAGE EARNERS

It is hardest for low-income earners to build up reserves and their own wealth. That is why the state subsidizes capital-building benefits for low-wage earners in the form of employee savings allowances. The requirements for the grant and the amount depend on the type of investment you choose.

End capital-forming benefits early

You can terminate a the contract at any time. However, in doing so you may accept additional costs or reduced returns. These details are specified in your individual contract.

In addition, if you terminate a contract prematurely, you must repay all grants received through the employee savings allowance. The legislature only provides for exceptions for married couples or employees who want to become self-employed, who have become 95% incapable of working or who have been unemployed for more than a year. They are still allowed to keep the grants.

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