(2023) 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.