The Company Pension Scheme

If the company pension does not deliver what you were promised

Every day we learn from politicians and the media that the statutory pension will at some point not be sufficient to maintain the accustomed standard of living in life after a professional career. Those of us who have taken out a company pension in addition to the statutory cover feel supposedly more secure because they receive additional provision in old age when they enter retirement. Often, however, we see with our clients, at the latest when the first payment arrives on the account, that the surprise or better the disappointment is big, if the company pension scheme turns out to be significantly lower than expected. This is often the case and it affects both employees who have concluded a conversion agreement with their employer and entrepreneurs themselves, especially from medium-sized companies who have concluded a bAV for their own pension provision.

At this point it should be noted that this is independent of which of the currently four possible variants of company pension schemes or five you have chosen or have been given by your employer. There are several causes for this imbalance between the pensioner's expectations and the actual available pension, which are mainly to be found in the nature of the pension model itself. Furthermore, the occupational pension scheme does not only offer advantages for both employees and employers, as you can see below.

Overview of the five options for a company pension scheme

• Direct commitment
• Support fund
• Pension fund (Pensionskasse)
• Direct insurance
• Pension fund (Pensionsfonds)

What is actually a company pension scheme?

The company pension scheme, also called company pension or, as it is more and more often called in advertising, remuneration optimisation, is in its state-subsidised form of remuneration conversion a tax-shifting model for provision in old age. It allows employees and employers alike to use the agreed, converted part of the income without income tax and social security contributions for old-age provision. Up to this point, this sounds very promising for all parties involved, because the employee provides for their pension and at the same time saves on social security contributions as well as taxes and the solidarity surcharge. The employer also saves, as mentioned, on social security contributions and, of course, the insurance company benefits too, since it has secured another contract for the next decades.

One might think this is a happy end for everyone, but there are many decades between concluding a company pension scheme and actually drawing the pension. A large number of different problems arise for both employees and employers, which come to light in particular when the employee retires. Below we have listed the most common disadvantages/problems of the company pension scheme that repeatedly lead to uncertainty and dissatisfaction among those affected. We are also happy to help you with the many-sided problems related to the topic of deferred compensation and the bAV.

The disadvantages of the company pension for employees

• Lower retirement pension and reduced earning-capacity pension
• Lower unemployment benefit
• Lower sickness benefit
• Pension payments from the company pension are subject to income tax
• Contributions still apply to pension payments from the company pension for health and long-term care insurance
• Sometimes enormous deviation between the sample calculation and the actual pension after deduction of all costs
• Sale of the company abroad and the employer's obligation to step in can lead to shortfalls
• Insolvency risks: employer insolvency, insolvency of consultants and brokers, insolvency of product providers (e.g. investment funds, life insurance companies, asset managers).

Our services regarding the company pension scheme for employees

• Review of your insurance documents with regard to a reversal of the company pension scheme
• Enforcement of an increase in the bAV with the employer
• Support in assessing the economic efficiency of a company pension scheme you have already taken out
• Examination of the legal options with regard to the employer's obligation to step in in the event of a shortfall by the pension provider
• Litigation and judicial enforcement
• Optimisation of charges when planning retirement and pension provision, including the structuring of severance cases
• Enforcement of claims for damages against banks, insurance companies, and (also independent) advisors – including future damages

Pitfalls of the company pension for employers

• Obligation to step in towards employees in the event of a failure of the pension provider
• Duty to review adjustments
• Sale of the company
• Advisor liability in the brokering of the contracts
• Regulation of business succession / anticipated succession, if applicable

Our services regarding the company pension scheme for employers

• Support with an expert actuarial appraisal
• Restructuring and settlement of the bAV as a charge-saving model
• Advice on the duty to review adjustments
• Advice on company acquisitions and risk analysis, including inheritance cases and company sales
• Litigation and judicial enforcement
• Support in setting up a foundation as an alternative to the classic bAV for entrepreneurs
• Legal and economic advice for employers on the choice of pension model
• Cost optimisation in the event of an imminent liquidity trap and/or a "pensioner GmbH", including restructuring
• Structuring and review of insolvency protection concerning gaps in cover, including trustee agreements and so-called insurance wrappers of foreign insurers
• Enforcement of claims for damages against banks, insurance companies, and (also independent) advisors – including future damages
• Planning and monitoring of models concerning time-value accounts and partial retirement, as well as their settlement.

Helpful further articles on the company pension scheme for employees

• Occupational pension schemes do not prevent poverty in old age
• Employers are often liable to employees for company pension schemes
• How trust in the company pension scheme can be destroyed

Helpful further articles on the company pension scheme for employers

• When employers are liable for reductions in pension funds
• How half-baked company pension commitments end up subject to judicial interpretation
• Company pension scheme: entrepreneurs must expect a wave of litigation
• Company pension scheme in the event of insolvency