A pension commitment is a written, irrevocable agreement with legal entitlement to the payment of a company pension. It is the only opportunity that shareholder managing directors with substantial holdings have to build up a high-performance company pension and to also profit from tax advantages at the same time.
- Tax savings for the company because of pension reserves that reduce profits
- The beneficiary is only taxable when the pension starts
- A tax-efficient alternative to cash payment for top management
- A company pension ensures retention of accustomed standard of living into retirement
Version 1: Performance-oriented pension commitment
A retirement pension at a fixed, agreed level with the possibility of an annual increase in entitlement in the active phase (recommendation: 2 to 4 %)
- Possibly with widow/widower transfer up to 60% of the notional or actual retirement pension
- With security to cover the risk of occupational invalidity on request
- Financing is via reserves formed in accordance with § 14 EStG
- Half of the reserves must be secured by law with securities or reinsurance
- Missing liquidity and security against non-operational risks such as occupational invalidity and death can be raised through reinsurance
Version 2: Contribution-oriented pension commitment
The company pays a certain contribution for life insurance. The company’s pension commitment is for the pension that can be financed from the insurance. This contract design means that the security cover required by law is not necessary because the pension obligation is 100% financed through the pension reinsurance at all times.
- Companies that determine their profit in accordance with § 5 or § 4 (1) EStG
- Medium term profit expectations or a short term peak profits
- A minimum commitment of 7 years until statutory retirement age for tax approval
Your customer advisor at Erste Bank or Sparkasse would be pleased to provide you with information on this special form of company pension provision.