Additional retirement security through employer support, offering tax and social benefits for both parties
Occupational pension plans (bAV in German) offer an additional way to save for retirement directly through your workplace. Companies allow their employees to convert a portion of their gross salary into retirement savings. This contribution is automatically deducted from wages and invested in an insurance policy or pension fund. Since this money is deducted before taxes, employees benefit from tax advantages. Additionally, for new contracts, employers must contribute a supplement of at least 15 percent of the converted amount if social security contributions are saved. The legal basis for occupational pension plans is found in Section 3, Number 63 of the German Income Tax Act.
Occupational pension schemes offer several advantages for employees:
- Building additional retirement savings without significant administrative burden
- Reduction of current tax and social security burden
- Legal right to salary conversion with employer contribution
- Independence from state pension developments
Company pension schemes are also worthwhile for businesses as they serve as a powerful tool for employee retention. By offering attractive pension solutions to their employees, companies demonstrate social responsibility and strengthen their position in the competition for skilled workers. Additionally, employer contributions are tax-deductible as business expenses. Therefore, occupational pension schemes represent a classic win-win situation – and form an essential component of modern employee benefit strategies.