Many employers offer their employees additional money on top of their normal salary. These so-called capital-forming benefits are intended to help with retirement planning.
The new training year has started in Germany. And even if the trainees’ working lives still lie ahead, it’s worth thinking about later now. Because there is extra money for old age for many beginners and all other employees.
Many bosses help with pension provision for employees: in the form of capital formation benefits (VL). These are financial subsidies from the employer to help you build your own assets.
Depending on the collective agreement and agreement, the company pays up to 40 euros per month for pension provision for its employees. The capital flows into a financial investment for the employee, trainee, civil servant or soldier. This can happen with the help of a fund or ETF savings plan, a building savings contract or a bank savings plan.
No official entitlement to benefits
“Nobody has a right to capital-forming benefits, but many employers provide this subsidy,” says Stefan Fischer from Stiftung Warentest in an interview with Update Wirtschaft tagesschau24. “You definitely shouldn’t miss out on this money.”
The money is explicitly used to build wealth. Therefore, it cannot be paid out as part of your salary. The VL contracts generally run for seven years. The employer pays in for six years, one year is a rest year. The money is then freely available or can be transferred to another contract.
The maximum amount for many providers – such as custodian banks – is limited to 40 euros per month, says Fischer. “But that’s 480 euros a year. That’s a considerable sum that can be accumulated over a seven-year term.”
ETF as a popular savings option
In the past, deposits in life insurance were particularly popular, but today you can also invest in ETFs, for example. ETFs are index funds that are listed on the stock exchange. They replicate an index, for example the DAX, as faithfully as possible. Since such a product does not require active fund management, ETFs are comparatively inexpensive.
And, as Fischer explains, they can contribute returns to paid-up capital. “ETF on broad indices: This is historically the investment option with the highest returns. But you have to be able to get through weak phases on the stock markets.” But since such VL contracts are designed for seven years, the probability of making a profit at the end of the day is quite high.
Another advantage is that the ETFs, which invest broadly in several companies, also spread the risks widely. In addition, the costs are lower compared to an active fund. “You have to keep in mind, however, that there are still costs involved, but ETFs are cost-effective,” says Fischer. Deposits of up to 2,800 euros over six years are possible.
Subsidy from the state possible
Anyone who earns below certain income limits can receive help from the state to build up assets. To this end, employees can apply for savings allowances. The decisive factor is the taxable income.
Anyone who invests in a fund or ETF savings plan and earns less than 20,000 euros per year as a single person can receive this allowance. It is a maximum of 80 euros per year for a single person. The allowance will be credited to the depot or account after seven years. The saver can then dispose of it. This means that the state and employers then save together for employee pension provision.
Take your investments with you when you change jobs
Anyone who changes jobs can often take their investment products with them. “It depends on whether the new employer also supports the offers,” says Fischer. This is the case with most employers. If the employer doesn’t offer any capital-forming benefits, you can make provisions on your own, says Fischer: “The payments into the deposit only have to flow through the employer.” But you can also get out of the contract. However, state funding would then be lost.
The situation is different when it comes to job loss or further training. “In the case of unemployment or further training, the state subsidy remains intact,” says the expert. The saver can then withdraw from the contract. Fischer therefore advises asking your own human resources department about the capital-forming benefits: “Then it will take its course.”