How can I invest employee savings schemes if I do not receive the employee bonus?

For investment funds and building society savings contracts, the employee savings bonus is available if the taxable income for single individuals is below a certain threshold. This is 20.000 Euro in the first case and 17.900 Euro in the second.

For married couples, the amounts are doubled. The other VL investment options, such as bank savings plans, occupational pensions, and life insurance, are particularly suitable for those who do not receive the employee savings bonus due to higher income. This is because these products do not offer the bonus at all.

Those who do not need or want to follow the criteria for the employee savings bonus and housing bonus should focus on the return on investment and their personal security needs. The advantages and disadvantages depend on the type of investment.

For example, since the interest rate on bank savings plans often depends on the current market situation, you don't really know how much you will end up with. An occupational pension, unlike other VL savings options, is not paid out after six to seven years but only upon reaching retirement age.

(2023): How can I invest employee savings schemes if I do not receive the employee bonus?

What are employee savings schemes and who is eligible to receive them?

Almost every employee and trainee (including judges, civil servants, soldiers) is entitled to capital formation payments (VwL) from their employer. The entitlement to VwL is regulated in the respective collective agreement, and some employers pay them voluntarily. The amount of VwL varies from industry to industry, starting at around six euros up to a maximum of 40 euros per month. Part-time employees usually receive VwL on a pro-rata basis, while pensioners and self-employed individuals are not entitled.

To receive capital formation payments, the employee must open a VwL-eligible savings contract and present a copy to their employer. The employer then transfers the monthly VwL payments directly into the savings contract. There are various investment options in which an employee can invest their capital formation payments: they can deposit the money into a bank savings plan, a building society savings contract, their company pension scheme, an investment fund savings plan, or a life insurance policy. VwL can also be used to repay a building loan.

Two of these options are particularly attractive because they receive additional government support in the form of the employee savings bonus. For investment funds and building society savings contracts, the employee savings bonus depends on different income limits: for share-based saving, the taxable income must not exceed 20.000 Euro (40.000 Euro for married couples), and for building society savings, it must not exceed 17.900 Euro (35.800 Euro for married couples). Higher earners are therefore excluded from this support.

Some VwL savings contracts have fixed minimum savings amounts. If the employer does not pay capital formation payments or only a small amount below the minimum rate, the employee can convert part of their salary to meet their required monthly savings amount. Increasing the savings amount can also be worthwhile if you want to receive the maximum possible government support.

(2023): What are employee savings schemes and who is eligible to receive them?

When will I receive the employee bonus?

The employee savings bonus is paid to you by the government on capital-forming benefits (vwL) that you receive from your employer and invest. However, the employee savings bonus is not available for all vwL investment forms.

There are various investment options into which an employee can invest their capital-forming benefits: They can deposit the money into a bank savings plan, a building society savings contract, their company pension scheme, an investment fund savings plan or a life insurance policy. vwL can also be used to repay a building loan.

Of these options, two are particularly attractive because they receive additional government support in the form of the employee savings bonus. For investment funds and building society savings contracts, the employee savings bonus depends on different income limits: For share-based saving, the taxable income must not exceed 20.000 Euro (40.000 Euro for married couples), and for building society savings, it must not exceed 17.900 Euro (35.800 Euro for married couples). Higher earners are therefore excluded from this support.

With building society savings contracts, there is also an additional advantage: An additional housing bonus, which is available up to an income limit of 35.000 Euro (until 2020: 25.600 Euro) per year (double for married couples).

The income limits are not really that low, as they do not refer to the annual gross income, but to the taxable income. Tax allowances, special expense deductions, work-related expenses and child allowances reduce the income accordingly.

(2023): When will I receive the employee bonus?

How do I find all the data I need to enter to receive the employee savings bonus?

Data has been submitted electronically to the tax office since 2018, so a specific entry is no longer required as it was in the past. Since 2018, providers of employee savings schemes no longer issue a "VL form". However, you should still receive an annual statement or account summary from your provider for your records.

You must apply for the employee savings bonus no later than the end of the fourth year after the savings year. Even though the employee savings bonus is only granted upon application, the extension to 7 years, known as the start-up inhibition period according to § 170 para. 2 no. 1 AO, does not apply.

(2023): How do I find all the data I need to enter to receive the employee savings bonus?

What is the level of funding through employee savings bonuses and government bonuses?

You are entitled to the employee savings bonus if your taxable income does not exceed a certain limit:

• For share-based savings (e.g. investment funds), the limit is 20.000 Euro (married couples 40.000 Euro).
• For building society savings, the limit is 17.900 Euro (married couples 35.800 Euro).

If you stay below the respective income limits, the additional financial benefit from the state bonuses can be worthwhile:
The employee savings bonus is 20 percent of the annual savings payments for share-based savings.

If you pay in the maximum amount of 400 Euro, you will receive an annual state bonus of 80 Euro. Since all employee savings contracts must run for at least six years, this amounts to 480 Euro that the state adds to the savings.

For building society savings, the subsidy is only nine percent - but the subsidised savings amount is higher: On a maximum of 470 Euro paid in per year, employees receive 43 Euro annually (rounded). That would be 258 Euro in six years that the state adds on top.

Home loan bonus
And another plus for building society savers: In addition to the employee savings bonus, every building society saver whose taxable income is below 35.000 Euro (single) or 70.000 Euro (married) is entitled to the home loan bonus (WoP). Since 1 January 2021, the home loan bonus has been significantly improved, even for existing contracts. The improvements are:

• the bonus from 8.8 percent to 10 percent,
• the maximum savings amount from 512 Euro / 1.024 Euro to 700 Euro / 1.400 Euro,
• the income limits (taxable income) from 25.600 Euro / 51.200 Euro to 35.000 Euro / 70.000 Euro (single / married).

Note: There are three different state subsidies for building society savings: If the employer transfers capital-forming benefits - also from their own salary - to a building society savings contract, you receive the employee savings bonus. If you pay your own contributions into the building society savings contract, you can receive the home loan bonus. And thirdly, since 2008, you can also claim the Riester subsidy for your own contributions to a certified building society savings contract.

Capital-forming benefits can also be used to repay a building loan and you can also receive the employee savings bonus for this, as long as you are below the income limit. If the lender allows additional repayments, you can reduce your building debt more quickly in this way. In addition to the state subsidy and the employer's capital-forming benefits, there is of course the performance of the respective product. It is worth comparing the best providers.

(2023): What is the level of funding through employee savings bonuses and government bonuses?

How do I obtain a certificate for employee savings schemes?

Under normal circumstances, you will automatically receive an employee savings bonus statement from your provider each year. This contains all the necessary details of your contract.

A "VL form" in paper form is no longer issued (BMF letter dated 16.12.2016). The employee must consent to the electronic employee savings bonus statement and provide their tax identification number.

(2023): How do I obtain a certificate for employee savings schemes?