Future Financing Act - The first sensible traffic light law to (significantly) improve capital-forming benefits?

With regard to the traffic light government and the Future Financing Act, one could probably aptly say: Even a blind, deaf and leg-amputated chicken sometimes finds a grain of corn.

I would like to focus on one (very positive) point of the bill in particular: Namely, the Amendment to the Fifth Capital Formation Act

Sounds boring? It usually is. The law forms the basis for capital-forming benefits.

Previously, you could invest 40 euros per month in capital-forming benefits. Up to the income limit of 17,900 euros per year, you were then also entitled to the so-called employee savings allowance.

If you invested in a securities savings plan, you could receive another 80 euros from the state (I'm leaving out other investment options such as a building society savings contract, as these are not to be changed by the law).

Calculation example (income under 17,900 euros):

• 40 Euro VL per month
• Investment in a fund or ETF (assumed return 7%)
• After 7 years employee savings allowance of 80 Euro per year
• Saved value: ~4,311 Euro plus 560 Euro employee savings allowance results in ~4,871 euros
• This would correspond to a return of ~10,4%

Calculation example (income over 17,900 euros):

• 40 Euro VL per month
• Investment in a fund or ETF (assumed return 7%)
• After 7 years employee savings allowance of 80 Euro per month
• Saved value: ~4,311 euros

What changes should the law bring?

• The income limit of 17,900 euros is to be completely eliminated - everyone is therefore entitled to the employee savings allowance.
• In addition, the limit of 400 euros will be increased to 1,200 euros per year.
• This will also significantly increase the maximum employee savings allowance. Namely from 80 euros to 240 euros per year
• Important: The regulations are to apply only to investment savings, not to building society savings contracts, bank savings plans,... - The aim is to promote share ownership

Calculation example from 2024:

• 100 euros VL per month
• Investment in a fund or ETF (assumed return 7%)
• After 7 years, employee savings allowance of 240 euros per year
• Saved value: ~10,779 Euro plus 1,680 Euro employee savings allowance results in ~12,459 Euro
• This would correspond to a return of ~11%

So if you continue to receive 40 euros from your employer, you would have to add 60 euros out of your own pocket. After 7 years, this would correspond to a personal investment of 5,040 euros.

In relation to the "own contribution", this would correspond to a return of over 25% p.a. correspond!

Of course, the law still has to be passed (probably in the 4th quarter of 2023) and there may well be changes.

Nevertheless, in my eyes this would be an extremely good start to promote the share culture by law.

A tax-free investment portfolio for retirement provision (as in many other countries) would also be much better for me, but I think this is a better or easier way to bring a large part of the population along.

What do you think of this proposal? And how have you been using your capital-forming benefits so far?

In my case, the VL are invested in an MSCI World. Unfortunately, I don't receive any subsidies, so I would be extremely happy if I could achieve a significantly higher return from 2024 onwards.

Source: https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Gesetzesvorhaben/Abteilungen/Abteilung_VII/20_Legislaturperiode/2023-04-12-ZuFinG/1-Referentenentwurf.pdf?__blob=publicationFile&v=2

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