Rmann (@Epi) on getquin

3Mon·

Company pension scheme part 2: stillborn?

First of all, thank you for all the positive feedback and helpful comments on my last post. In particular, the comments from @Dr27589 pointed out significant errors and blind spots in my calculations. I would now like to correct them.

My errors - and a correction

1. taxes: I assumed that the rules for private pension insurance would apply when taxing the payout capital. But that is wrong! The capital of the occupational pension scheme is taxed at the personal income tax rate of the year of payment (other income). It is not entirely clear where this will stand with a payout of €200,000. There is currently still the "fifth rule", i.e. the capital income is spread over 5 years, so that €40,000 pa of additional income is taxable. The top tax rate is currently 42%, the marginal tax rate for senior citizens is probably 30%. And nobody knows what it will be in 2044 anyway. I'm going to assume a low 30%, which would be €12,000 pa for 5 years or a total of €60,000 on an income of €200,000.

2. social security contributions: I also assumed that you only have to pay back the social security contributions saved (15% GKV + 3% PV). Fiddlesticks. The 18% SV contributions are credited to the entire payout capital - including the capital gains! The sum of the payout capital is divided over 10 years / 120 months, the social security contributions are calculated on these 120 months and then debited from the account on a monthly basis. According to the Test.de calculator, this would be €300pM SV contributions for 10 years for a payout of €200,000, i.e. a total of €36,000.

3. pension points: The loss of pension entitlements due to the "detour" of pension contributions to the occupational pension scheme is greater than I initially thought. The online calculator predicts a loss of €80pM for a deposit of €300pM over 20 years. Calculated over 20 years of retirement, that's just under €20,000.

4. not a mistake, but I want to say it again. There are allowances in the payout phase on which you don't have to pay taxes or social security contributions. They should be around €300 per month in 2044. However, the prerequisite for this is the decision to opt for a guaranteed pension. This means that you transfer your entire capital to the insurance company, which then pays a monthly pension, i.e. approx. 3%pa on the initial capital. So you have to become Metusalem in a world without inflation for this to be worthwhile. Inheritance is not. An absolute dealbreaker and not recommended.

The corrected calculations

bAV 300€pM gross/ 150€ net:

Payments in 2024-44: €72,000

Savings capital at 7%pa: €149,700

bAV costs: €4,900

Taxes (30%): €43,400

SI contributions (according to calculator): 140€pM = 16,800€ (10 years)

Loss of pension entitlements (according to calculator): 80€pM = 19.200€ (20 years)

Final sum: 65.400€

vs. broker (150€pM, 7%): 70.300€.

bAV 600€pM gross/ 300€pM net

(I'll keep it short)

Final sum: 151.200€

vs. broker (300€pM, 7%): 175.900€.

Conclusion

My dear Scholli! I would never have thought that our state would devise such a devious system behind a wall of complicated rules to fleece its citizens. In fact, the state lets the capital lever and the compound interest effect work against the occupational pension saver, so that all the positive effects are lost.

So even with a very favorable occupational pension scheme, maximum state subsidies and a dream return of 7%pa, after 20 years you end up with massive losses compared to a broker savings plan ACWI. Most of you will probably be in an even worse position. So if you don't have a company that sinks its money into your occupational pension, you'd be better off investing your money elsewhere. I will probably do the same.

Ciao, dear capital leverage, interest effect and tax savings! I'll look for you somewhere else! I'll let you know when I've found something. Next stop probably my private pension insurance. 🫣

Your Epi

175

99 Comments

Kevin E.@KevinE

3Mon

Thank you very much for your post! The effort you put in is one thing. Wrapping it all up and writing it down in a way that is easy for the reader to understand is another.

A post that clearly demonstrates the added value of this forum!

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Enrique@Der_Dividenden_Monteur

3Mon

Definitely belongs in the #gqevergreens
@DonkeyInvestor

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Daniel@Dr27589

3Mon

I'm glad I could help :)
Due to the employer's subsidy of at least 15%, your own contribution of €255 gross/month would be sufficient to reach the actual investment sum of €300/month. If your employer pays more, this will of course reduce your own contribution.

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Roberto Zertifikato@Dividendenopi

3Mon

Thank you for your efforts. I have a BAV that my employer "gave" me on top at the time and I didn't pay anything else into it voluntarily. I'm going to stop working for the company at the end of the year and then I'll probably make it non-contributory or cancel it. I think it's better to cancel and I'll put the little money I get into an ETF until I officially retire in 7 years' time. After the termination, I can report how much of the money that my employer has paid in over the last 12.5 years I will get out. I already have a terrible feeling.....

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Tenbagger2024@Tenbagger2024

3Mon

To put it relatively briefly in a nutshell.
Can't you generally say that the more people are involved in something, the less return you get in the end?
All these people want to be paid and earn money from the contracts and in the end the person who concludes the contract can be happy to make a little profit.

So it's best to do our own project without involving many people.

Unless the project is called
Berkshire Hathaway

However, it is noticeable here that Buffet pays himself a relatively low salary and also tries to keep the number of employees at the holding company manageable.

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Mart@Maddy-0

3Mon

It is questionable why there are so many options for pension provision. But a lot is important.
I have a unit-linked Rürup and a unit-linked private pension with HDI (from Tecis), each with 110 euros 3% dynamic.
As far as I know, you can't cancel them (Rürup). On the one hand, I think I'll keep it running even if I invest a lot in ETFs and pay a bit more for the funds, but have fixed money for the pension. But it would probably be smarter to cancel it and put it in an all world

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Peter-Plan@Peter-Plan

3Mon

Thank you for your post!
I also had a consultation about half a year ago about a baV and was also shocked at how much was left over in the end.
The costs were also much higher than in your example.

Well, now I'm continuing to save in an ETF/portfolio as a retirement provision!

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Ludaaa7@Ludaaa7

3Mon

...the crazy thing is that it's almost impossible for the average employee (e.g. me) to work out which is more worthwhile. At least not without weeks of research and support from people who are well versed in the subject.

I can invest up to €150/month in a U-Kasse, of which the employer pays 50%. I can also take out direct insurance for another €150 with a 20% subsidy from the employer. If I do both, I get an additional €2,000 bonus per year.
Sounds great at first. In 2023 (in which an MSCI Wolrd makes ~20%, Allianz will then have earned a strong 3.4% interest.
After 10 years, the Allianz advisor tells me that it would allegedly not be possible to show me how much return my BAV has generated in 10 years (a rogue who thinks evil of it...)
Switching to the new alliance tariff is possible, then up to 60% of the payment would go into ETFs of my choice (statutory maximum). But then you'd have to pay the full acquisition fees for the new contract again.

Now you have to calculate how much the employer's subsidy is, whether the pension is reduced, whether private health insurance makes sense and gets more money out of it.... At this point at the latest, every normal person stops and simply hopes that money will come out in the end.... but you can't speak of full transparency here.
For 10 years I simply accepted that the entire subsidy from the employer would be top...and then there would be (some) money when I retired, even if I gambled away everything else in my life... a secure alternative asset, so to speak, that can withstand drugs and rock'n'roll. Allianz earns money for this security ;-)

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Stuttgarter81@Moneymoney

3Mon

Epi First of all, thank you for your input. 👍🏻 ...I took this as an opportunity to take a look at my occupational pension contract with Allianz. I had concluded it in December 2004 before the tax reform. (with 20 percent flat-rate taxation by converting part of my Christmas bonus). After 20 years, I have paid in 16,000 euros. The surrender value is 15,900 euros. In recent years, the return has been around 3 percent before costs. So the performance of the product is subterranean. However, the contributions were paid out of my gross income - my income tax rate is 42 percent. This means I paid in a net premium of around 10,000 euros. A return of 59 percent over 20 years isn't exactly exhilarating and I think I'll have to pay health insurance premiums when I cash out. Ultimately, however, I'll probably let it continue to run unchanged. Or what do the experts think - should I cancel the contract or make it non-contributory? Thank you very much for your feedback. Best regards 🖖

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Kill_Baulitz@Johann_van_der_Smut

3Mon

I think I'll have to read through your post at my leisure during my team meeting tomorrow. At the moment I'm still putting money into a private pension with Allianz and paying 260 euros a month from my gross into the PVK. My partner is still saving...
I think there's a lot to do...

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