The fairy tale of the secure pension

The company pension scheme, curse, blessing or bonanza ?
dmz – Deutsche Molkerei Zeitung (Issue 11 / June 2006, p.40-42)
by Johannes Fiala, lawyer
Once upon a time, that’s how most fairy tales begin. A long time ago, in 1984, the then CDU Federal Minister of Labour and Social Affairs, Dr. Norbert Blüm, announced that “our pensions are secure”. The pension funds are empty. The retirement age is currently set at 67 years of age. This means that both employers and employees must work together to find pension solutions and build up capital for old age. The earlier this is started, the lower the savings contributions required. This must be incorporated into the subconscious. Either one remembers the formulas or one masters the financial calculator of HP (HP10BII). Only in this way the returns with interest and compound interest can be calculated exactly.
Since 01.01.2002 all employees subject to pension insurance now have the right to deferred compensation within the framework of a company pension scheme (bAV), practically every employer must deal with this issue.
But as always in life, it depends on the perspective. Everyone wants to profit, but the smallest savers, who need it most, usually fall by the wayside. When a WIN-WIN situation is established, everyone benefits.
Wise thinkers were developing social care models as early as 1850. Socially conscious entrepreneurs such as Gute Hoffnungshütte, Siemens, BASF and also other companies were the first to initiate support schemes in their companies, which are still referred to as old-age provision schemes today.
The employer is always the responsible party, even if the occupational pension scheme is handled by others. The consequence is that the employer is liable for everything, including the mistakes of the insurance industry and representatives. The law states: “The employer is responsible for the fulfilment of the benefits promised by him, even if the implementation is not carried out directly by him” (§ 1 para. 1 sentence 3 BetrAVG = Company Pension Act).
Now to the implementation channels: By law there are 5 implementation channels. The well-tried direct insurance which is mostly still available in the companies. Since 01.01.2005 it has been equivalent to the pension fund. Logically speaking, there would then only be 4 ways of implementation. The pension fund, which as the name suggests invests in funds. The pension commitment and the provident fund. Each implementation method is listed individually in the Income Tax Act. Many also offer the working time account model as a 6th implementation path.
Certain special features must be observed in law firms as set out below.
Special topics include building capital in the business with proper structuring. A good equity ratio is important. Because a better rating is achieved with the banks. You may also be able to achieve bank independence over time. You just have to do it consistently. A tax firm, an accounting firm, and all businesses, should also be entrepreneurial. Don’t you think in terms of problems ? but in solutions.
The real task is to deal with the issue of money in your own company.
Take, for example, the pension commitment (investment alternatives other than insurance are possible), the lump-sum funded support fund (also without the involvement of insurance), the working time accounts (here, too, insurance should be avoided) and the special allowances. A corporation can use all of the above options. A law firm which has declared its intention to make a profit in accordance with § 4 para. 3 EStG, still has the possibility to implement the lump-sum funded relief fund as well as the special allowances in the company. With these examples mentioned, the tax firms, the accounting firms as well as all the companies can build additional capital in the company. What is important for all ? what does the company or the employee achieve on the bottom line. The last areas listed are all special topics that cannot be answered in one sentence. Upon written request, the relevant lawyers, tax advisors and specialists will be named. Law firm principals should also pay attention to the most important thing, just like other business owners, and that is liability. The topic of liability runs the gamut from A = Watch out to Z = Restrain. The liability arises on the one hand with the own employees and on the other hand with the external consultancy. The list of liability problems has become so long, it too would go beyond the scope of this article. The law office Fiala from Munich has specialized in the liability of brokers and tax consultants. This can also be obtained on written request.
The question that can be derived from the whole issue. Is there a silver bullet? If so, which one? Do I have any disadvantages as a small law firm compared to a large law firm?
At this point, too, I would just say: compare the providers (what comes out in the end) and calculate. Even if I take the different ways of implementation, from only one insurance company, then I have here alone already a difference of almost 10,000 ? in the guaranteed maturity benefit. Can you earn your money so quickly. But no one sees that, because no one calculates it. But you should do that in the future. Consider how many companies are represented on the market. Now imagine further, you would have to calculate all companies ? with all implementation ways. Then you can take time out from now on, because the time involved is simply enormous. But it pays off. But one thing we usually learned in school. There is only one formula to extrapolate the final capital with a certain term, a certain savings contribution and a certain interest rate. If I still want a choice between annuity and lump sum ? then you only have the immediate pension routes coming into play anyway. If I then still want to enjoy unlimited tax exemption (no overprovision), the decision falls again on these two implementation paths. If I take the third point in addition ?capital accumulation in the enterprise? then automatically only the pension promise (with free capital investment) and the lump-sum endowed support fund (free capital investment) come to the carrying. An additional deficit in the consultation, is the inflation rate. Unfortunately, this is also usually forgotten. This could also represent a liability problem.
This sentence coins:We are not only responsible for what we do, but also for what we do not do.

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About the author

Dr. Johannes Fiala
PhD, 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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