Pension fund

The pension fund became another implementation option in Germany in 2002. The employee receives a legal entitlement to the respective benefit against the respective legally independent provisioning organisation. Like the direct insurance and staff pension scheme, the benefits of the pension fund are lifetime retirement pensions; invalidity and survivors pensions can be added on.

The pension fund is subject to the Insurance Supervisory Act but its investment rules are expected to be more liberal than for insurances. However, the corresponding legal regulations have not yet been issued. This kind of fund offers a wider range of investment opportunities and can rely on the attractive earnings opportunities offered by equities. Pension funds are protected in the event of insolvency by the Pension Insurance Association.

As with direct insurance and staff pension schemes the contributions paid are in each case tax free up to 4% of the income threshold for pensions insurance per year under Section 3 No. 63 EstG and free from social security levies until January 2009 at least. Moreover, a further EUR 1,800.00 can generally be invested each year tax free. The fund can be financed by both the employer and the employee. In addition, pension funds offer the option of changing the structure of existing provisioning systems as explained here The pension fund is the optimum provisioning format for those wishing to benefit from the current trend in the capital markets to finance retirement provisioning.