Whether the statutory pension will be enough to live on later in life remains to be seen. Supplementary retirement planning is therefore becoming increasingly important. In the metal and electrical industries, as well as in the wood and plastics processing industries, IG Metall has opened up another opportunity for employees to make personal provisions for life after retirement through collective bargaining agreements on retirement planning.
Metal and Electrical Industry
Under the collective bargaining agreement on retirement-related benefits in the metal and electrical industries, apprentices receive retirement-related benefits (AVWL) in the amount of 159.48 euros per year, while full-time employees receive 319.08 euros. Part-time employees are entitled to a pro-rated amount. Similar collective bargaining provisions exist in other industries and the skilled trades as well—meaning money from your employer that can be saved for retirement.
Textile Industry (West)
In the textile and apparel industry (Collective Bargaining Area West), a new collective bargaining agreement on deferred compensation has been in effect since January 2022. Anyone working at a company covered by this collective bargaining agreement receives capital-forming benefits (VWL) of 240 euros each year. Eligibility begins after six months of service.
Those who use the VWL as the base contribution for their supplemental retirement savings receive an additional employer subsidy, which was revised in 2021 and is now even more worthwhile. Starting in 2024, the subsidy will be 210 euros, and starting in 2026, it will be as high as 240 euros.
What investment options are available for AVWL?
The AVWL is either directed into an eligible private retirement plan or into an employer-sponsored retirement plan; a cash payout is not permitted. Depending on the investment type, the government offers various incentives. The possible investment types are:
- Private retirement savings plan: The plan must be eligible for tax incentives under Section 10, 88 et seq. of the Income Tax Act (EStG).
- Deferred compensation into an employer-funded retirement benefit plan: The employer pays the money directly into the plan. The amount is deducted directly from your gross pay. This reduces your taxable income and—as a rule—results in lower income taxes and social security contributions.
- Company pension: If there is a voluntary company agreement in place, the employer may offer a so-called employer-funded pension plan. In this case, the employer contributes the funds to the company pension; the money never becomes part of the employee’s compensation.
When does eligibility for AVWL begin?
Employees and trainees are eligible after just six months of uninterrupted employment with the company. Anyone who has not yet taken advantage of AVWL should not waste any more time, as these benefits are not paid retroactively. You can find information on retirement-related benefits on the MetallRente pension fund’s website.
It Pays to Top Up
AVWL contributions from the employer provide employees with a nice starting capital to use for additional retirement planning. That’s because those willing to save pay little out of their own pocket—yet more money ends up in their savings pot.
For young, single people just starting their careers, a company pension plan with deferred compensation is recommended. This involves supplementing the AVWL by allocating a portion of your gross pay toward retirement savings. You can use MetallRente’s calculator to see how much additional retirement savings you can expect later on.
What’s the difference between employer-sponsored and private retirement plans?
To help employees save on taxes and social security contributions, the employer transfers contributions from the employee’s gross income to the pension fund with which it has a framework agreement.
With private retirement savings, employees enter into a contract with a bank or insurance company of their choice. They pay the contribution from their already taxed net income.
However, those just starting their careers should generally avoid long-term investment products such as life insurance. Good to know: Banks and insurance companies are required to keep a record of the consultation and provide information in writing. Our advice: It’s best to ask the works council or human resources department beforehand whether the employer has, for example, entered into favorable group agreements with MetallRente or even provides a subsidy.
Private, tax-subsidized Riester retirement savings or an employer-sponsored pension plan via deferred compensation—which is better?
That depends on your individual situation—specifically, your income level and family size. The Riester subsidy offers families with multiple children high subsidies that can exceed the tax benefits of gross salary deferral. Ultimately, it therefore depends on your individual gross salary, the amount of your family’s taxable income, and the number of children.
Do I have a say in choosing the company’s pension plan?
To fulfill employees’ statutory right to salary conversion, companies—even if they already have occupational pension plans—must offer an eligible type of occupational pension plan. However, the employer can decide which provider to choose: whether a pension fund and/or a pension plan and/or direct insurance. If a company in the metal and electrical industry offers direct insurance, it must, in any case, meet at least the same standards in terms of costs and benefits as the direct insurance offered by MetallRente.
Can I transfer my existing occupational pension benefits to a new employer?
Whether you’re changing jobs or are unemployed: All contributions that an employee makes toward a company pension through deferred compensation remain theirs. Anyone who switches to a new employer that offers MetallRente can continue their plan. Everyone has a legal right to transfer their pension benefits to their new employer’s pension provider. Alternatively, the contract can be continued privately under the same terms and conditions, with contributions continuing to be deducted from net pay.
Can unemployed individuals continue to make contributions?
Yes, provided that contributions were already being made through the former employer prior to becoming unemployed. If an employee has agreed to a company pension plan through deferred compensation, they have the right to continue the plan with their own contributions if they leave employment or are no longer entitled to wages for other reasons (such as receiving sick pay, maternity leave, or parental leave). The contract can be placed on a non-contributory basis.
Do I have to pay health and long-term care insurance premiums for my MetallRente when I reach retirement age?
If you paid your contributions to the company pension plan from your gross income on a tax- and social security-exempt basis, you must make contributions during retirement if you have statutory health insurance. However, those with mandatory coverage are only required to pay health insurance contributions on the portion of their monthly company pension benefits that exceeds the applicable exemption limit.
In the case of a lump-sum payment, the pension capital is spread over a notional period of 120 months, and you pay the corresponding contribution monthly for ten years. However, long-term care insurance contributions must be paid on the entire occupational pension if it exceeds the current exemption limit. If you paid the contributions out of your net income and took advantage of the Riester subsidy, you do not have to pay social security contributions.
Is it worth choosing MetallRente?
MetallRente is a joint institution of the collective bargaining parties—namely, IG Metall and Gesamtmetall. They guarantee top rates and bring their strengths to bear on the pension fund. This makes it possible for all employees—whether in a small craft business or a large corporation—to benefit from the same terms. In addition, MetallRente offers all eligible products as well as supplemental insurance for occupational disability and survivors. MetallRente stands out for its attractive rates, security, a broad product range, and one-stop administration.
Detailed information about AVWL and an online calculator are available on the MetallRente website
