Some people get scared when they think about their own retirement provision. You simply can’t put anything back yourself. But what if the employer takes over?
Giving away money that is due to you month after month? Actually not an option. But some employees just don’t know that they can get an extra salary from their employer that is intended for wealth accumulation. The whole thing is called either capital-forming benefits (VL) or pension-effective benefits (AVWL) – depending on the employer. The basic idea behind the services is similar, but they differ in details.
Up to 480 euros per year are currently included with VL, with AVWL it is a maximum of 478.56 euros. However, the money is not simply transferred to the salary account, but must flow directly into certain pension products. In the case of the VL, these are products that serve to build up assets in the short and medium term. At AVWL, there are products for long-term wealth accumulation. Here’s what you need to do to keep the money from slipping through your fingers:
1. Find out from your employer
First of all, you should find out whether and to what extent your employer pays VL or AVWL. Because not everyone does that, says Niels Nauhauser from the consumer advice center in Baden-Württemberg. The services are basically voluntary.
However, many employment and collective bargaining agreements or company agreements provide for this pension component for employees. Nauhauser recommends asking the HR department of your own company. Otherwise, a look at the contracts will help. Good to know: In many cases, trainees can already assert claims.
2. Decide on an investment product
If the employer gives you a bonus for wealth accumulation, you should consider which product the money should be paid into. Capital-forming benefits can flow into a home savings contract, a bank or securities savings plan or the repayment of a home savings or bank loan, says Helena Klinger from the Institute for Financial Services (IFF).
Which form of investment is right for you depends on your individual situation. According to the Baden-Württemberg consumer advice center, building society contracts and bank savings plans are particularly suitable for employees who value security. A securities savings plan for those who seek higher returns and can withstand fluctuations in value. For real estate owners, the subsidy can be used to pay off the loan.
A Riester pension, deferred compensation for a company pension scheme or a company pension can be considered for benefits that are effective for old-age provision. Which of the products is the most attractive here depends on the respective offer and its costs and return expectations. For example, contact a consumer advice center if you need independent advice.
3. Set the monthly contribution
The benefits that the employer pays can be topped up with your own money. Helena Klinger points this out. Think about whether and to what extent you want to do this.
4. Conclusion of contract: Inform your employer
Once you have decided on a suitable product, conclude the contract with the selected savings rate. Then tell your employer for which contract and to which account he should transfer the money, says Nauhauser.
5. Benefit from government funding
If you earn little, you may also benefit from the employee savings bonus in the case of capital-forming benefits. It has to be applied for every year at the responsible tax office with the tax return and depends on the product and the amount of the payments.
According to the Baden-Württemberg consumer advice center, there is an allowance for the home savings contract or loan repayment (9 percent for a maximum annual payment of 470 euros) and the fund savings plan (20 percent for a maximum annual payment of 400 euros). The allowance cannot be paid into the bank savings plan. In addition, there may be a home construction premium for VL home savings contracts.
At the AVWL, there may be supplements to the Riester pension under certain conditions. Otherwise, employees can benefit from tax advantages if, for example, they top up the employer payments with their own contributions.
6. Have the benefits paid out to you
According to the consumer center, VL contracts generally run for seven years – the money is saved for six years, and the contract must be suspended in the seventh year. After the seventh year, savers can freely dispose of the money. If the market price of the security investment is poor at this point in time, it may make sense to postpone the sale.
AVWL contracts save employers until retirement. Depending on the agreement, the money saved is then paid out taxed as a pension or one-off payment, says Niels Nauhauser.