Flexible pension and remuneration systems for uncertain times – this is what employers, employees and also legal and tax advisors are increasingly looking for. Not least because of the uncertainties on the labour market, the turmoil caused by the financial market crisis, the complicated legal situation under social law and the considerable cuts in the statutory pension insurance system, those affected from all sectors are looking for future-proof insurance strategies in order to be able to plan certain phases of life in a balanced and responsible way.
After all, structural reforms are the buzzword of the time in Germany. Whether it’s a reorientation of business locations, labour market policy or health policy – the “status quo” is to be improved everywhere through structural changes.
This structural reform has already taken place in the area of social old-age provision. The amendment of the Company Pensions Act, the effects of the Retirement Assets Act, the introduction of the Retirement Income Act and the raising of the statutory retirement age (“pension at 67”) – no other area of social policy has undergone such drastic changes in recent years as well as sovereign intervention by the legislator.
The decisive factor here is the unstoppable demographic development, which shows that the financing system of the statutory pension insurance in its current form is no longer sustainable. The previously formulated goal of safeguarding the standard of living in old age has been replaced by the goal of maintaining a basic provision in old age (which is, however, indispensable and therefore indispensable) – even if this is not always clearly communicated to the broad and affected public by the competent sovereign authorities.
For the prudent legal users, employers and employees this becomes unmistakably clear:
Since old-age provision has been more strongly transferred to the personal responsibility of citizens, all forms of private and above all occupational old-age provision must be used to secure the standard of living in old age, but innovative supplementary modules must also be integrated.
Fortunately, with the introduction of the Act on the Social Protection of Flexible Working Time Regulations of 6 April 1998 (the so-called “Flexi Act”), the legislator has created the opportunity to find an answer to these challenges. With the introduction of the resulting working time accounts, there have since been outstanding new opportunities for broad groups of employees and employees to make their working hours more flexible and to plan their individual pension situation during their working lives and in advance of receiving statutory pension benefits.
Against this background, it is possible for employees to waive the payment of any salary components in a freely definable amount in accordance with the tax and social security requirements of the legislator and to transfer these to the respective time value account free of tax and social security contributions. Only a salary subject to social insurance contributions above the limit of so-called “minor employment” must remain with the respective employee after a waiver of remuneration in this respect, provided that he also did not perform minor employment prior to the introduction of remuneration into a time value account.
The possibility of this “gross saving” enables employees to build up “wage reserves” from their own deferred remuneration components, whereby at a later point in time any desired leave or early retirement phases can be financed until the statutory retirement age is reached.
In contrast to statutory part-time work for older employees, whose statutory promotion by the Federal Employment Agency ceased to apply on 1 January 2010, a working time account system is thus financed entirely from the employee’s remuneration components, so that the employer does not suffer any additional loss of earnings or liquidity as a result. At the same time, however, employers can use working time account solutions to control age structures in personnel policy in order to achieve a targeted readjustment of the workforce if necessary. Consequently, the employee can control his time value account savings independently (according to the specifications of the employer’s defined framework conditions) in order to be able to determine the extent of leave or early retirement phases in which the downstream tax and social security levies then take place.
In this context, Kenston Pension Ltd supports both employers and consultants from all sectors in the complete legal implementation of working time account systems in their own company or in those under mandate. All necessary legal requirements and backgrounds, such as collective agreements,
opening clauses, balance sheet treatment, etc., are analysed and implemented for you. Further service features of Kenston Pension Ltd can be found under the link “Services” in the navigation bar.