Not everyone who has been using part of their salary for a long time to make provisions for old age receives a subsidy from the boss. That should change in 2022. But problems are already emerging.
Top up your pension and still get support from the boss? Sounds good at first. And it will be a little easier in the coming year. In that case, employers no longer only have to subsidize new contracts in a mandatory manner, but also contracts that were concluded before 2019.
Many workers, however, are likely to experience difficulties. Because: Not every insurance company allows an existing company pension contract to be increased. And the employer cannot always easily conclude an additional second contract. We explain what you should know if you already have a company pension contract and when you will particularly benefit from the new rule.
What will change with the company pension?
From 2022, companies will also have to subsidize existing contracts with direct insurance companies, pension funds and pension funds with at least 15 percent of the conversion amount. So far, this has only applied to new contracts signed from 2019. However, the amount of the subsidy is limited to the amount that the employer actually saves on social security contributions (more on this below).
The word “conversion amount” in this context means that you use part of your gross salary to pay it into a company pension contract. You can save up to 4 percent of each year current income threshold (BBG) Convert to statutory pension insurance (West) without having to pay social security contributions. You can even invest up to 8 percent without deducting taxes.
The employer can conclude the conversion agreement with a direct insurance company, a pension fund or a pension fund. This type of company pension is also called deferred compensation. The new rule only applies to them. The two other models of company pension schemes, the direct commitment and the commitment via a support fund, are not included. You can read more about the various company pensions here.
The basis for the new company pension is the Company Pension Strengthening Act, which came into force in 2018 and is intended to make company pension schemes more attractive, especially for small and medium-sized companies and low-wage earners. But the plan has not yet worked out. According to the Federal Government’s latest 2020 pension report, the proportion of those who are subject to social insurance contributions has even fallen – from 54.6 percent in 2017 to 53.9 percent in 2019.
Do all employees receive the mandatory allowance?
No. Although every employee has the right to pay part of their gross wages into a company pension, the employer only has to do something if he saves on social security contributions by converting earnings. He must pass on the amount of this saving in future, a maximum of 15 percent of the conversion amount is mandatory.
“Employers should ideally pay everyone a flat-rate subsidy,” says Ralf Raube, head of corporate pension schemes at the financial consultancy MLP, in an interview with t-online. “So also for those employees for whom they don’t save anything. That simplifies administration in payroll, for example in the case of salary increases, and increases acceptance among the entire workforce.”
How much more money can I expect?
That depends on how much you pay in yourself, whether your salary is below or above the income threshold and whether your employer grants the subsidy as a lump sum or “sharp” accounts. With the top billing, your boss only pays as much as he actually saves on social security contributions.
“We advise our customers against doing this because it is very time-consuming to administer,” says MLP expert Raube. “Because the savings can change from month to month.” Instead, he recommends that companies pay the grant at a flat rate. “15 percent is the duty. Anyone who wants to be a little more attractive pays at least 20 percent.”
Older worker operates a machine (symbolic picture): The mandatory subsidy for the company pension is sometimes not that easy to implement. (Source: AnnaStills / Thinkstock by Getty-Images)
Especially when almost all employees earn below the income threshold, it costs companies only slightly more to choose flat-rate payroll – if at all. The situation is different if a larger part of the workforce makes full use of the previous social security-free conversion option of 4 percent and their salaries are also above the BBG.
The following table shows when the employer would pay extra – and when he would still do business. We assume that an employee converts 100 euros of his gross salary per month.
Salary below the BBG in health insurance
| Implementation grant | Amount of grant employee | Impact for employers |
|---|---|---|
| 15 percent flat rate | 15 Euro | + 4,98 Euro |
| flat rate of 20 percent | 20 Euro | – 0,02 Euro |
| great billing | 15 Euro | + 4,98 Euro |
Salary above BBG health insurance, but below BBG pension insurance
| Implementation grant | Amount of grant employee | Impact for employers |
|---|---|---|
| 15 percent flat rate | 15 Euro | – 4,50 Euro |
| flat rate of 20 percent | 20 Euro | – 9,50 Euro |
| great billing | 10,50 Euro | 0 Euro |
Salary above the BBG pension insurance
| Implementation grant | Amount of grant employee | Impact for employers |
|---|---|---|
| 15 percent flat rate | 0 Euro / 15 Euro * | 0 Euro / -15 Euro * |
| flat rate of 20 percent | 0 Euro / 20 Euro * | 0 Euro / -20 Euro * |
| great billing | 0 Euro | 0 Euro |
* Whether there is a subsidy for the employee or financial losses for the employer depends on whether the company pays the subsidy even if it has no savings on social security contributions. It is not obliged to do so, but it can choose to do so, for example, to prevent displeasure within the workforce.
What if I already receive a 15 percent grant?
“If the employer already grants a subsidy in the required amount, it depends on whether what he pays can also be taken into account,” says Raube. It must be clear that he is paying it because of a social security saving. And: The subsidy under the Company Pension Strengthening Act must be over a direct insurance, a pension fund or a pension fund to run. A support fund contract does not count.
If the previous grant does not meet the requirements of the Company Pension Strengthening Act, the employee is entitled to additional money. “The employers then have to add up to 15 percent on top,” said Raube.
What if I haven’t received a 15 percent grant yet?
Then your employer has to step up. But in practice it is sometimes not that easy. Because not every insurance policy allows you to add the missing value to an existing contract. This can be the case, for example, if the old contract guarantees high interest rates that would no longer be granted in the meantime.
“The employer should then first check whether a second contract with the same provider is possible,” advises Raube. Alternatively, a new contract with another provider would be an option. Depending on the amount of the missing grant, the amount may not be sufficient for a new contract. But there is also a solution for this.
Young technician (symbol picture): If the insurance sticks up, you have to be inventive. (Source: shironosov / Thinkstock by Getty Images)
“Instead of increasing a contract, you can also reduce your deferred compensation amount,” says Raube. “For example, if you have paid in 100 euros a month so far, you can go down to around 87 euros. The rest of up to 100 euros is then the employer’s allowance.”
Is a company pension worth it at all?
Basically, the following applies: deferred compensation is all the more worthwhile, the higher the employer’s allowance and the better the contractual conditions. “That should be at least 20, better 30 percent,” recommends Philipp Rehberg from the Lower Saxony consumer center.
Here, negotiating skills can certainly lead to a better result. “If the employer only gives the subsidy prescribed by law, it is usually not worth it.” Because then the concessions in taxes and duties usually do not compensate for the deductions in the later pension, which has to be taxed.
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