by Johannes Fiala, Lawyer (Munich), M.B.A. (Univ.Wales), M.M. (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Banker (www.fiala.de )
Resourceful bAV company consultancies advertise a pension commitment check: ‘We would be happy to undertake the professional examination of pension commitments for you. In doing so, we also ensure that common deficiencies that occur in practice are also identified. With order the mediator receives questionnaires ? unfortunately however thereby central risks are not recognized, because practice requires more than zig standard questions, rather individual case examination of all files is announced. In addition a few examples from practice:
Welfare application after pension check: a client runs a small limited liability company ? A GGF and his wife are employed with a pension commitment. Other employees and the cooperating subsidiary have no pension commitments. Management Consultant U. has the broker present the documents for examination. All O.K. think U., the broker, and the customer. A mistake, I’m afraid. When the customer goes bankrupt, a lawyer checks that there are numerous pension commitments and pledges, but unfortunately these are contradictory and incomplete ? and the 30 or so reinsurance policies have already been partially written back. The client noticed that the management consultant had unfortunately only received part of the files from the tax consultant for examination. Without a pension, the GGF must now unfortunately apply for social welfare.
Our legal adviser: Management consultant U. thought to entrust the audit to a legal adviser. This did not make things any better. Legal counsel wrote in the pre-formulated contract that the information would come from the broker or management consultant and the boilerplate opinion would be delivered through the broker. The catch is that as a cardinal duty, counsel must personally provide fact-finding and advice. This is the same as with an insurance broker, who cannot simply waive his cardinal main obligation to perform (BGH III ZR 251/04, judgement of 20.01.2005).
Process financiers: The customer cannot enforce a pension with the insolvent GmbH. Several process financiers say without further the Übernahme of the court and lawyer costs, after above all neither the merry management consultant, nor the tax advisor, according to information of the local district court president a permission after the law advice law possess. Even a lawyer to the managing director of the bAV management consultation to make, would have brought nothing. (BGH XI ZR 41/04, judgement of 22.02.2005). The mediator ?clamped? by the management consultant is horrified ? No miracle, because finally it had received a part of the appraisal remuneration as commission and had taken up the personal confidence of the customer ? as bAV expert one sells finally always better.
Deposit: The pension commitment is no less problematic in the event of the sale of a company and in the event of anticipated succession. If the purchaser of the company later points out deficiencies or there is a dispute in the family with the heirs, the GGF together with his partner will be at the mercy of “his former” pension commitment. GmbH. If a dispute arises, the GmbH simply freezes the pension payments. Now the GGF gets the idea of asserting its lien, but again nothing comes of it: The insurer will hardly interfere in the dispute with the GmbH, and simply deposit with the district court ? The GGF and the GmbH can then argue in peace, and that can take a long time.
Incidentally, insurers behave in a similar way when there is a dispute between the GGF and the insolvency administrator. Lawsuits before the “court of last resort”, i.e. the last instance, can take a long time ? 10 years of proceedings can be constitutional. The practitioner calls this the “judicial credit”.
Social security application after social security check: The customer had at that time also ordered a social security check, over the mediator with the management consultation. The expert checklists were processed and the text module appraisal led to the desired success. The GGF and his wife received substantial repayments from the statutory pension insurance ? and the intermediary a commission from the subsequent investment. But now it turns out that the advice was incomplete ? there would have been considerable advantages for the spouses through voluntary contributions and other creative measures. If proper advice had been given, the wife could receive a full pension earlier than at 65. The GGF would also receive a full pension after becoming disabled before the insolvency ? if he had been properly advised. Both of them would thus have been entitled (even if it is not in the pension commitment) for legal reasons to receive their pension earlier than promised in addition to a statutory pension.
The tax advisor is surprised, the agent horrified: In his university documents for training as a financial planner, he looks in vain for the finer points of social security and the design details in connection with the occupational pension scheme.
No unemployment benefit despite social security check: But it gets even better ? the daughter is also affected by the insolvency, the insolvency administrator gives her notice. Thank God I get unemployment benefit, she thinks, and reports to the employment office. The office replies “Thank you very much for your application, which we hereby reject”, because after examination by the employment office she was “exempt from insurance”. ? after all, she does not receive any benefits, only her contributions are refunded for four years (but only on application). Also in such cases the tax advisor is liable, as the LG Cologne had already decided years ago (Az. 16 O 6/93). In this case, the checklist advice given by the intermediary had unfortunately missed the mark ? essential details were missing.
Royal ways: The starting point of every design is the analysis. The undertaking of having an intermediary check the pension commitment with checklists is like a patient who would have open-heart surgery performed by a nurse. Even with a doctor, treatment only begins after a personal examination and consultation. This takes time, because checklists can hardly cover all conceivable cases, especially not when it comes to existentially complex legal and tax issues. Then the question of finances arises, and here above all the question of risk diversification. The intermediary should have the client sign off on the fact that structuring the entire retirement provision via a single implementation channel practically means a cluster risk. Which customer sets already consciously everything on a map? Above all, if the customer must sign also that the optimistic advertising slogans over the insolvency protection of the pension promise spring from salesman wishful thinking and have little to do with practice? Here ?enthaftung? for tax counsels and Finanzdienstleister is urgently in demand. Insurers and insurance distributors can also be liable, for example for false advertising and the dissemination of half-truths. In individual cases the customer must decide how much insolvency protection is desired. After all, there are also customers who can literally afford to do without it. In practice, the restructuring, not only of the pension commitment, but above all of the implementation and reinsurance, begins with the examination and structuring in company law and inevitably leads to a comparison of the law with the possibilities abroad.
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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