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Company pension: possible changes in sight

Company pension: possible changes in sight

During a meeting of the Ministry of Social Affairs, the Ministry of Finance, and employers’ and employees’ associations on September 27, 2016, the core elements of a reform of the company pension were probably decided.

So far, there has been no official statement of the ministries. According to various media reports, the two responsible ministers agreed on the main features of a reform. A common draft law is expected within the next two weeks. There are different announcements concerning the details of the reform plan. Summarizing all reports anticipates the following changes:

  • Pure defined contribution commitments without guaranteed benefit amounts shall be possible. Albeit, this is conditional on the governance by collective agreements.
  • The framework of support for company pension contributions which are free of tax and social security shall be raised. However, the frame for the exemption from tax and social security contributions shall remain at the limit of 4 % of the income threshold of statutory pension (BBG). Merely the additional 1,800 Euro which are free of tax but not of social security contributions are supposed to be raised to 3 % of the BBG (2,232 Euro in 2016). Thus, this so far static frame will become dynamic.
  • Reportedly, employers who annually pay in 240 to 480 Euro for low-wage earners will receive a tax subsidy of 30 %. There are different views on how much a low-paid worker may earn. Some sources state a gross annual salary of up to 18,000 Euro, while others report of 24,000 Euro.
  • The offsetting of fiscal, private, and company pensions against the basic income will no longer be made in all cases.
  • When Riester subsidies are combined with occupational pension schemes, employees shall be spared from social security contributions.

The obligation of an “opting-out” for company pensions, as it was in particular discussed by the Minister for Social Welfare, will not be established. Company pensions shall remain optional.