What are employee savings schemes (Vermögenswirksame Leistungen) and who is eligible for them?
Almost every employee and trainee (including judges, civil servants, soldiers) is entitled to employee savings schemes (vermögenswirksame Leistungen - vwL) from their employer. The entitlement is regulated in collective agreements, and some employers pay voluntarily. The amount varies by industry, from approximately 6 to a maximum of 40 Euro per month. Part-time employees receive vwL on a pro-rata basis, while pensioners and self-employed individuals are not entitled.
To receive vwL, the employee must take out a savings contract eligible for vwL and present it to the employer. The employer transfers the monthly vwL directly into the savings contract. There are various investment options, including bank savings plans, building society savings contracts, company pension schemes, investment funds, or life insurance. vwL can also be used to repay a building loan.
Government support through employee savings bonus
Building society savings contracts and investment funds are particularly attractive as they are subsidised with the employee savings bonus. The bonus is income-dependent:
Until 31.12.2023: Income limit for investment funds 20.000 Euro (married couples 40.000 Euro), for building society savings 17.900 Euro (married couples 35.800 Euro).
From 1.1.2024: Uniform income limit for both options of 40.000 Euro (married couples 80.000 Euro) according to the Future Financing Act (§ 13 para. 1 of the 5th VermBG). The new regulation applies to vwL invested from 1.1.2024 (§ 17 para. 17 of the 5th VermBG).
Increasing savings contributions
Some vwL savings contracts have minimum savings contributions. If the employer pays no or too little, the employee can convert part of their salary to reach the minimum rate. Increasing the savings amount is often worthwhile to receive the full government subsidy.
