mast image

Special Report

Impact investing

Sections

German tax benefits 'better'

Tax advantaged contributions to the proposed new second pillar pensions arrangements in Germany could be much twice as high as originally thought, according to a Morgan Stanley Dean Witter (MSDW) study.
MSDW’s Peter Koenig in Frankfurt, the author of the study, comments: “Everybody assumes the tax-free contributions would be 1% in 2002/03, increasing by one percentage point each year to 4% after 2008. But somehow in the new law they have mixed up the default compensation and employer contributions, we think.”
A careful reading of the law, he says, shows that the individual contributions can be for either an individual (third pillar arrangement) or an occupational scheme (second pillar) but not both, and that the employer can then add another 4%.
This means that the combined tax-free contribution of 5% in the first year increases to 8% after 2003.
“So, where the government is thinking of DEM10bn in tax income losses, it could be DEM45bn when all the other tax breaks available are included,” says Koenig.
When all the other tax breaks available are included, the total that could be contributed would be more than 10% of pay. This level of contribution approaches what MSDW believes is the level of tax allowances needed to reach the level of investment required for Germany’s pensions liabilities.
According to the study the investment at the 5% contribution levels mean the projected inflows into the capital markets could be e33-53bn in 2002 depending on the assumptions made. This could increase to e75-110bn in 2008.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2543

    Asset class: Search of an Asset manager / Advisor managing / Advising a risk-based equity derivatives overlay program.
    Asset region: Global Developed Markets Equities, Global Emerging Markets Equities, Swiss Equities.
    Size: CHF 700-2100 million.
    Closing date: 2019-06-17.

  • QN-2544

    Asset class: Transitional Real Estate Debt.
    Asset region: North America (USA/Canada).
    Size: $50-100mn.
    Closing date: 2019-06-17.

  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

Begin Your Search Here
<