With the completion of the disposal of the crop sciences business earlier this year, Aventis emerged in what may be its permanent stage of development – at least for sometime.
It is now focused on producing pharmaceuticals, but only prescribed medicines. In Germany, Aventis is the number one provider, with a turnover of some E2.7bn. The employee numbers based in Germany come to 7,500, with its German headquarters at Hoechst just outside Frankfurt.
Aventis Pharma Germany is still part of the well developed Hoechst pension arrangements, in that all the investment aspects and the administration are handled by the Hoechst Pensionskasse, one of the long established chemical industry pension plans.
“When we had the new collective agreement for the industry introducing the Riester arrangements, we decided that this would also be done through the Pensionskasse (PK),” says Hanfried Stöppler, responsible for compensation and benefits at Aventis Germany. “The PK is very well known as an institution by our employees and has a very high reputation. Many of them have their mortgages from the fund as it offers very good terms. So the attitude to the PK is very positive.
“The scheme provides very comprehensive benefits built up over the years, some through the PK. The basic pension scheme is an average 2% contribution from both employer and employee of gross income up to a level of E4,500 per month. In addition, there is the supplementary scheme which is company financed through book reserve system,” Stöeppler says.
In 1998, a scheme was introduced which became effective the following year, where employees could invest their asset formation allowances in an additional pension system. On these contributions existed a lump sum tax.
“Now we have the new tax law, enabling up to 4% of pay up to the social security contribution levels to be contributed to pension out of each employee’s gross income,” says Stöppler. “So in the new additional scheme neither the employee nor the employer has to pay tax or social security contributions on contributions up to E2,160 pa. This is a major change in the system.” Up to the beginning of this year, employer contributions to the PK were taxed at 20%, but for contributions under the new arrangements this has been changed.
Also under the Riester changes employees who qualify for this can obtain the extra subsidy, which is possible with the Aventis scheme. “Our system can provide the opportunity so that employees can choose to get the Riester additional sum.” This, he explains, is different from what is usually happening within the chemical industry, but at Aventis the decision was taken to provide this as well as what was required under the collective agreement with the union. Aventis is providing these through the PK. The additional salary conversion up to 4% of the social security contributory levels is provided for, including the agreed employer contributions of E134.98 for the first E478.57 and E13 for each additional E100 contribution the employee makes. Contributions above 4% of the social security contribution ceiling are taxed at 20% up to E1,752. Contributions above E3,912 (E2,160+E1,752) are fully taxed.
There is a fundamental difference in approach between the ‘Riester model’ and how the chemical industry has gone about tackling the issues. “Riester is more on the lines of old-age provision law and providing net income, which they support by giving a special subsidy when you contribute from your own pocket out of your net income.
“On the other hand, we allow contributions from an employee’s gross income by way of salary conversion and we give special contributions from the employer when an employee decides to participate – then you obtain another amount from the employer. These are two completely different ways, one out of pocket and one from the gross income, which is a very different approach.”
This can provide all sorts of complications for payroll management and running the different systems of lump sum contributions as well as the salary conversion arrangement on a monthly basis. “Employees can decide that they want to have both.” It was not easy to achieve, but the payroll system can now provide such facilities. Stöppler gives a hint of the complications when he points out that when it comes to paying pensions from the PK the new arrangements have brought changes. “Pension payments normally have reduced taxes, with only the investment gains being taxed. But under the Riester changes, that part that has been contributed by the employer and is due to the subsidy will be fully taxed.” So the new law on old-age provision has meant significant additional administration on the part of the employers.