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 The previously formulated goal of safeguarding the standard of living in old age has been replaced by the goal of maintaining a basic provision in old age (but it would be inconceivable to do without and therefore indispensable)- even if this is not always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 makes it unmistakably clear: since old- age provision has been more strongly transferred to the personal responsibility of the 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 the statutory partial retirement scheme, which is no longer supported by the Federal Employment Agency as of January 1, 2010, a working time account system is therefore 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.
Against this background, we at Kenston Services Ltd are pleased to be able to offer our customers and affiliated partners a working time account solution that provides a complete solution for employers and employees in Germany with a unique selling proposition.
Core component of our “System Kenston Time Accounts” is the establishment, implementation, administration and ongoing support of time account systems for employers and employees. This includes the legal, tax and accounting setup of time value accounts as well as internet-based software support. In addition, it enables employers and employees to use appropriate investment products to back up this solution, taking into account the needs of working time accounts.
Use the manifold possibilities of your “time value account” in order to be able to (co-)shape the path of your company and the further life of your employees in a financially flexible and balanced way.
We look forward to accompanying you on this path.