Ampel aims to amplify the scope of their employee retirement benefits plan.
Retirement life isn't always a bed of roses with just the statutory pension. Company pensions can contribute, but only around half of workers currently benefit from this. The traffic light coalition aims to trigger more participation, particularly in small businesses, by introducing fresh incentives.
The German government has proposed expanding occupational pension schemes. The cabinet has signed off on a draft bill from the Ministry of Labour and Finance. This move is to persuade companies to make occupational pensions a more substantial part of retirement planning. The ambition is to make it standard, even in small businesses, as per Labour Minister Hubertus Heil.
Presently, more than half (54%) of all socially insured employees in Germany profit from company pensions. The Ministry of Labour points out that there are deficits in smaller companies, often unaffected by collective agreements, and among low-income workers that need to be rectified.
In the future, small companies will be able to provide this benefit to their employees. According to the cabinet paper, "Occupational pension promotion for employees with lower incomes will be enhanced in tax law." This means businesses will have increased certainty for offering occupational pension promises. More specifically, the income limit for promotion will be raised to 2,718 euros per month. Moreover, employees will not lose their promotion due to wage increases.
Deputy government spokesman Wolfgang Büchner said that pension funds will have more freedom to achieve better returns on the capital market and subsequently higher occupational pensions. However, the state will anticipate annual tax losses of 155 million euros due to the tax improvements in the long term.
The insurance association GDV applauded the enhanced promotion for low-income workers. Now, politics should focus on reforming the promotion of private retirement plans. Spokesman Büchner mentioned that there's no set timeline for this, "The discussions are ongoing." The IG Metall trade union agreed that the law could benefit lower income brackets. However, the regulation that allows insured individuals under 50 to secure against possible pension cuts with extra payments is harmful. The traffic light coalition (SPD, Greens, and FDP) wishes to abolish this rule for future generations, allowing it only for the elderly.
Companies can significantly contribute to improving retirement planning for their employees by offering more robust occupational pension schemes. This is particularly crucial for small businesses, as the German government aims to encourage more participation through enhanced incentives and tax benefits.
