Occupational pension strengthening laws: An initial overview
A first overview of the effects on occupational pension provision and working time accounts
The draft bill for the second law to strengthen occupational pension provision (2nd Occupational Pension Act) and to amend other laws has been presented. It is to be submitted to the cabinet at the end of August and then to the parliamentary procedure. The law requires the approval of the Federal Council (Bundesrat).
Easier access to social partner models
To date, there are very few social partner models (only pure contribution commitment without guaranteed pension) on the market. In order to strengthen these, companies who are not bound to a collective labour agreement should now also be given the opportunity to participate, for example by obtaining the consent of the relevant trade union. From the employee’s perspective, social partner models differ from other models of occupational pension provision (defined contribution plans) in that there is no choice of investment concept, no guaranteed pension, and no capital option.
Practical tip: With our support, you can compare all the options in detail before making a decision.
Opt-out systems for automatic salary conversion at company level
An opt-out system (i.e. automatic enrollment in the company pension scheme with the option for the employee to object) could previously only be introduced through collective agreements. This is now also possible through company agreements if the employer forwards at least 20% of the social security savings. Companies without a works council still cannot use this option.
Practical tip: Experience shows that implementation significantly increases the participation rate in company pension schemes and thus the attractiveness of the employer. We are happy to support you in the strategic development of models and the legal adaptation of regulations.
Early access to occupational pension provision
Since 2023, there have been no longer been any additional income limits for those who have been insured for many years in the statutory pension insurance and who draw a full or partial pension before the standard retirement age. Today, early access to the company pension scheme is only possible if a full pension is drawn from the statutory pension insurance. In the future, this will also be possible if a partial pension is drawn from the statutory pension.
Higher severance payment limits
The legally-maximized severance payment limits will double (to EUR 70.70 per month in 2024) if the severance payment amount is transferred to the statutory pension insurance with the employee’s consent.
Improvement in the promotion of low earners
The low-income subsidy amounts to 30% of the contribution financed by the employer. The previous fixed income limit is to be made more dynamic and will in future amount to 3% of the contribution to the social security ceiling in the statutory pension insurance (West) – (2024: EUR 2,718 instead of the previous EUR 2,575). In addition, the maximum eligible contribution is to be increased from EUR 960 to 1,200.
Credit balances and early retirement
Since January 1, 2023, the additional income limits for early retirement pensions in the statutory pension insurance have been abolished. Now, it should also be possible to draw on credit balances from time accounts when taking early retirement until the standard retirement age is reached.
Practical tip for 3. – 6.: The expanded range of options allows innovative strategies to be developed in the context of the shortage of skilled and managerial staff, with efficient models for the flexible transition to retirement for all parties involved. Together with us, you can design a model tailored to the needs of your company for the targeted combination of design options. Our expert discussion with experienced consultants, which is free of charge for the company, can be an important first step.
Reinstatement of life insurance policies after unpaid periods
The reinstatement periods for life insurance policies (direct insurance) have so far only been regulated by law for parental leave. This regulation, which states that the contract can be reinstated at the original conditions within three months of the end of the unpaid period (regardless of the duration of the unpaid period), will be extended to all unpaid periods.
Changes to pension funds
Improvements are to be made to the options for early withdrawal and capital investments in pension funds.
New option for pension funds
Pension funds should also be allowed to make installment payments in the future.
Digitization
In future, the Pension Security Association (PSV) will be able to issue its contribution assessments entirely automatically, provided that there is nothing outstanding and that there are no further assessments to be carried out with respect to the contributions.
Contact us for your personal consultation.