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Germany: Aba wants less pension “burden” on firms

GERMANY- The German corporate pension association, Aba or Arbeitsgemeinshcaft fuer Betriebliche Alterversorgung called for the government not to “burden” employers who offer contributions to pension schemes.

Aba said in a statement that the government wanted to promote pension schemes but at the same time loaded them with taxes.

The association’s appeal comes as the German parliament’s mediation committee is due to consider themes of the pension reform such as the tax-privileges abolishing Alterseinkunfgesetzt (AEG).

According the current regulations, employees can pay up to four per cent of their wages, a maximum of 2,742 euros, in an “income threshold”, Beitragsbemessungsgrenze, tax and social security contribution-free.

In addition, up to 1,752 euros can be paid in a pension fund or a direct insurance through the so-called Entgeltumwandlung, or automatic payment. These contributions are taxed at a flat rate of 22% but are social security contribution-free.

The maximum overall tax would amount to approximately 4,610 euros a year, Aba said, but “later on pensions coming from the automatic payment are fully taxable”.

The Alterseinkünftegesetz income law plans “to cross out” the current pre-age taxation, that occurs as workers save for their pensions, and increase the maximum tax-free saving threshold to 1,800 euros, 48 euros more than it is currently allowed.

Aba however also stresses that employers and employees must pay together a quota of 42% of social insurance contributions.

“Thus the annual expenditure for contributions goes up to the upper limit of 350 euros,” Aba said and pointed out that a full tax on illness and nursing care insurance must be added on top.

From 2009 the current tax privilege on the social security insurance, Sozialversicherung, is expected to be abandoned, bringing the cost of contribution to more than 1,000 euros, the Heidelberg based association forecasts.

Aba said it hoped that by the mediation on the contribution frameworks of the Entgeltumwandlung, automatic payment, the intended tax-free limit is increased to more than 1,800 euros.

The association also warned on the expenditures “load” in the saving phase imposed on company pension schemes through social security contributions and the illness and nursing care insurance contributions.

“Aba suggests leaving contributions generally social security-free for company pension scheme, and not loading the employer’s share, in any case.”

Meanwhile Finance Minister Barbara Hendricks was reported to have said that tax exemptions on insurance policy payments are to be abandoned next year.

The president of the Bundesbank, Axel Weber, has admonished the government to implement the reform programme Agenda 2010.

“It is about getting on with it, not vacillate and hesitate,” he was quoted as saying at a press conference.

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