Company pension scheme part 2: stillborn?

Enrique@Dividenden_Monteur

7Mon

@KevinE Thank you!
The whole thing has probably benefited me the most. I have been freed from a few misconceptions and now know that my occupational pension scheme is worth nothing, despite the good insurance conditions. That probably saved me a few 10k€. In this respect 👍

After 1.5 years in my occupational pension scheme, I have a return of just under €1000 or +20% on the deposits. Knowing now that these profits will go entirely to the state and the health insurance companies is really bitter. And the fact that it doesn't matter how much return I make, the profits always go to the state is a mess. I have to come to terms with that now. And then I'll draw the consequences.

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7Mon

Definitely belongs in the #gqevergreens
@DonkeyInvestor

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Nostradonkey💩@DonkeyInvestor

7Mon

@Der_Dividenden_Monteur is bookmarked. I'll read it soon.

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Nostradonkey💩@DonkeyInvestor

7Mon

@Der_Dividenden_Monteur makes no sense without the first part. I have therefore included both

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Daniel@Dr27589

7Mon

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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Dividendenopi👴@Dividendenopi

7Mon

@Dr27589 This AG allowance is a bit special in my case. I might write to you about it by e-mail.

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7Mon

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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GrafZahl_Boersenstrasse@GrafZahl_Boersenstrasse

7Mon

@trader64 I had also been given a company pension plan with Allianz (direct insurance) by my employer. When I found out about the conditions, I canceled it and had it paid out. The capital was approx. +-0 after 5 years. After payout (possibly due to a shortfall) it was approx. 30% less. But I'd rather have it that way than have dead capital for another 20 years and end up paying 30%.
Better an end with horror... .

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TheGuardian@TheGuardian

7Mon

@Epi great post which I have been thinking for long time. I am intending to cancel after having paid into bav for 10 years. But I am unclear if it makes sense to do so now. Is it better than too late?

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6Mon

@Epi How did you justify the early payout? I also have a direct insurance policy (dormant for 12 years) from my first employer. According to Allianz, a payout is only possible from the age of 60 if the DP is terminated?

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6Mon

@TheGuardian If you want to provide for your retirement with market returns, an ETF savings plan is definitely more profitable. bAV is only worthwhile for people who want to provide for their retirement in their call money account.

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GrafZahl_Boersenstrasse@GrafZahl_Boersenstrasse

6Mon

@GrafZahl_Boersenstrasse There is a so-called de minimis limit (4242€/ 35€pM pension). If you have less, you can have the amount paid out.

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6Mon

@Epi Thank you very much! Unfortunately, I'm a bit over the limit after all. Crap.

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Tenbagger2024@Tenbagger2024

6Mon

@GrafZahl_Boersenstrasse In any case, you can still suspend the payments. You won't be able to get your hands on the pile and it will probably only be worth a fraction in the end, but at least you won't be throwing good money after bad.

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7Mon

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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7Mon

@Tenbagger2024 Basically, I agree with you: the fewer parties involved, the more the saver gets to keep.
However, the landscape is also constantly changing, companies are automating, digitizing and passing on the cost reductions (e.g. mylife). In other words, this party is only minimally involved. If special tax rules then take effect, a point could sometimes be reached at which even pension insurance is worthwhile. That can quickly be a few 10k€. You have to do the math. That's what I'm trying to do right now...

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Tim@investorsapiens

7Mon

Thank you for your very interesting contribution, I also have a company pension with my employer. I could increase it voluntarily by paying up to 300 of my gross into it, but I've always instinctively decided against it and just left it at what the employer "gives" me. In the long term, nothing beats compound interest on the stock market. A few days ago, I looked into the topic of retirement provision and the study by Fidelity Research and was always amazed by compound interest. https://investorsapiens.de/beste-altersvorsorge-ab-40/

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7Mon

@investorsapiens The question is whether this "gift" is of any benefit to you. After all, the employer does not pay its employer's social security and tax contributions for you to the state, but to your occupational pension scheme. YOU have to pay them back in full with compound interest! And you will also lose pension points as a result of the gift. This will be quite expensive for you and, as far as I can see, 99% of the time it will even be a losing proposition compared to giving up the "gift".

The occupational pension scheme is not intended to secure your pension, but to relieve the state coffers at your expense. The common good before the individual good.

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6Mon

@investorsapiens best decision with so much ignorance.

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7Mon

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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7Mon

@Maddy-0 Have a look at what the conditions are for the "fixed money in the pension", usually under 3%pa on the initial capital with complete capital waiver. At first I also thought "having is better than needing". But when I compared this to a simple ETF savings plan, I was very disillusioned: what are they doing with my money?

Then I realized that the armies of representatives and employees in their glass palaces have to be financed...

Even $XEON is better. So it's best to get out of this system. And if that's no longer possible, then at least don't throw any more money into it.

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7Mon

@Epi I would roughly say (in my experience) that if you have a Rürup or private pension plan (unit-linked) like me, you should know that you have to give up your 1% more because funds are naturally more expensive than an ACWI. In the end, the only question is how much you really have to pay or how high the costs really are. I guess half of them don't even know exactly what they are paying. (I count myself among them)
Because you don't have any idea how much money is actually in it. At least for me. The only advantage is probably just that you can't see the money and can't touch it so quickly and in the end you know that you'll get a certain amount as a pension

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7Mon

@Epi The only question is where there is a tax-relevant advantage or protection if you have such a unit-linked pension insurance. Laying them on top of each other 1:1 would probably show it, but there may not be as big a difference as you think

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7Mon

@Maddy-0 As I said, I'm on it... I'd like to know what I'm putting my money into.

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7Mon

@Maddy-0 There is one advantage to this pension rip-off: disposable income decreases, which automatically reduces the pension gap without the pension having to increase. Or in other words: the employee gets used to €150 less income. 😅

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7Mon

@Epi Are you currently doing any calculations? It's probably difficult because every insurance company has different costs etc.

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7Mon

@Maddy-0 You know my calculations for my occupational pension. I'm currently working on my pension plan. The devil is in the detail. For example, 15% partial exemption for pension plan payouts vs. 30% in the ETF custody account every year. No insurance agent would tell you that! 😅

The costs of my pension plan are transparent for once. However, you have to find out for yourself what impact the costs have on the return.
If the costs are not transparent, they are usually around 3-4%pa (this was the case with my old Allianz contract). If the provider then still gets a brilliant 3-4%pa market return, then you can be happy if you get the deposits out (as with my old alliance contract).

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7Mon

@Epi Unfortunately, most contracts are not really transparent. In my case, for example, I only have the amount I pay with dynamics etc. But I don't see any costs etc

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7Mon

@Maddy-0 If non-transparent, then 3-4%pa costs. That was the case with the contracts I checked at great expense.

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7Mon

@Epi then I would probably have to ask my advisor if he can send me the contracts/costs?
If an all world costs 0.2% and is taxed at 70%, you have to put how expensive the product is next to it, as you say. As far as I know, I have classic ETFs. Just had a look:

45% Ishares MSCI world
25% Ishares Core Emerging markets
20% Ishares Msci Europe
10% Ishares C MSCI parcific ex Japan

Once with the private 110€ and with the Rürup 100€

In principle, the costs should not be too immense

(All done at VolkswohlBund via a Tecis advisor)

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Peter-Plan@Peter-Plan

7Mon

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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7Mon

@Peter-Plan If that's your conclusion from my post, then it made sense to someone else! 👍

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Peter-Plan@Peter-Plan

7Mon

@Epi has confirmed me once again!
I already made the decision back then.

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Ludaaa7@Ludaaa7

7Mon

...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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7Mon

@Ludaaa7 You said it, it's all far too complicated for Normlos. And hope (for a little extra income) dies last.
But at the latest when you retire, you'll have to pick up your calculator and decide whether the guaranteed pension with a tax-free amount but expropriation and minimum interest rate is better or a payout with approx. 50% tax but sensible further investment.
That will hurt!

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6Mon

@Ludaaa7 but you also pay your share from your gross and not from your net as with an ETF. In addition, you receive a subsidy from your employer and have therefore already paid in around twice as much as with an ETF (with the same actual expenditure). Furthermore, you only pay tax on the income from the ETF each year when it is paid out. At retirement age, you pay tax on the payout at your personal pension tax rate and still benefit from the allowances for health insurance. At the same time, with a provident fund you can still benefit from the one-fifth rule for tax purposes. Furthermore, you have no risk of loss as with an etf and your investment is even Hartz4 protected during the savings phase or safe in the event of personal insolvency. And if you choose the pension benefit on payout, you are guaranteed to receive it for life with an annual increase in the pension. So even up to the age of 111. In summary, occupational pension provision is lucrative and the best choice for retirement provision. In my opinion, an etf is also interesting but is more suitable as an additional medium- to long-term investment. Furthermore, an etf is not comparable in character to a pension plan, where longevity is still insured!

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6Mon

@market_analyst_5 All these points are taken into account in the contribution. And yet the occupational pension scheme is dramatically worse. Where is the mistake?

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Stuttgarter81@Moneymoney

7Mon

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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7Mon

@Moneymoney You will only know your return (on the net amount paid in) when it is paid out. You'll probably have to pay around 50% in contributions and lose pension points, so you'll end up with around €8,000 (if you stop contributing today). The variant with expropriation and 3% guaranteed pension is even scarier.

I'm no expert, but my guess is that your net income is better off with the broker, despite the subsidy.

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Kill_Baulitz@Johann_van_der_Smut

6Mon

@Moneymoney then get the right information first and not on this platform with its pointless posts. A little tip: if you pay twenty percent flat-rate tax and pay it in annually from your Christmas bonus, you will NOT have to pay any tax or health insurance on it when it is paid out. Congratulations on the contract from the old days!

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Stuttgarter81@Moneymoney

6Mon

@market_analyst_5 I don't like your aggressive tone. ...tax-free is clear - I didn't write anything to the contrary. As far as health insurance contributions are concerned, I'm pretty sure that they are levied. ...I wish you a relaxing weekend so that you can calm down a bit!

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7Mon

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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Woods@Woods

7Mon

The VBL company pension is compulsory for us. Since I also calculated the conditions some time ago, I unfortunately realized that despite the good employer's share, the money is better kept by me. My plan is to have the entire pile of money paid out to me when I retire and waive the monthly contributions...even if that also makes an "ouch" for tax purposes.

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7Mon

I have the option of getting an additional 30% from my employer with Allianz. As I already have a Rürup and private pension, I decided not to take it. What I learned when I was very young is that nothing is a gift

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Steffen U.@BMWFreak79

7Mon

A small additional note: With a combination of BAV and private health insurance, the SHI portion is later eliminated, which at least reduces the part of the social security by a lot. This makes the whole thing a lot more interesting again.

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Vincent@TheRealBusiness

7Mon

Thank you for this valuable Beitrag👍🏻

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Mister_ultra@Mister_ultra

7Mon

I have a wonderful company pension plan, which my employer even supports 100%. I pay €90 a month and my employer pays €90 a month. So a total of €180 a year.

Every year I look forward to the report and the projection of my bav. If I continue to pay in like this for the next 35 years, I will receive a lifelong pension of €250 per month. Of course, this still has to be taxed and €180 today vs. €250 in 35 years - well, there's no need to mention inflation.

I'm annoyed every month that I have to give away €90 of my salary. I would probably be better off with €50 a month in MSCI World instead of €180 bav (regardless of the additional flexibility).

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