VBL pension: How to pay tax on supplementary pensionsThe VBL supplementary pension fund helps public sector employees to build up additional pension provision. There may even be state subsidies.
The Federal and State Government Employees' Retirement Fund (Versorgungsanstalt des Bundes und der Lander – VBL) is the supplementary pension fund for the public sector. According to the VBL, 4.8 million employees from the public sector are insured, and 1.4 million people already receive a so-called company pension from the VBL (as of 2021). This makes the VBL Germany's largest supplementary pension fund for the public sector.
This is how the VBL pension principle works
Those who work in the public sector are entitled to a supplementary pension on the basis of the "Tarifvertrag uber die betriebliche bzw. additional pension scheme for public sector employees (ATV)" an entitlement to a company pension scheme. As a rule, public sector employers cooperate with the VBL. Register new employees there automatically.
Once enrolled, the principle works like this: The employer pays a large part of the expenses for the basic VBLklassik insurance, employees pay a smaller partial amount. This partial amount is automatically deducted from the income subject to supplementary pension and transferred to the VBL. It is also possible to take out additional voluntary pension insurance with the VBL. The voluntary VBL pension is a funded company pension plan.
Requirements for the VBL pension
In order to receive a VBL pension when you retire, you must have worked in the public sector for at least 60 months. However, there are exceptions, for example, if the insured event occurs as a result of an accident at work that is related to the employment relationship.
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The purpose of the supplementary pension fund is to support public sector employees with subsidies to the statutory pension insurance so that their pensions come closer to the level of civil servants' pensions.
Tax incentives in the accumulation phase of voluntary VBL pensions
Payments into the VBL pension may be tax-advantaged in the accumulation phase. However, employees in the public sector only receive the tax incentive in the case of an additional voluntary pension, not in the case of the basic VBLklassik insurance plan.
If you take out an additional voluntary VBL pension, you may be eligible for Riester subsidies. One of the prerequisites is that the insured person is directly entitled to the allowance. This is the case for all employees who are compulsorily insured under the statutory pension scheme.
In the case of a voluntary company pension plan with the VBL, deferred compensation is also possible. Converted income is eligible in 2020 up to 6.642 euros per year tax-free. In addition, VBL savers save on social security contributions – as much as 3.312 euros per year.
VBL pension: taxation of the income share or deferred taxation?
How the VBL pension is taxed at retirement age depends on how the contributions were treated for tax purposes during the savings phase. If a public sector employee pays the expenses for the VBL pension during the qualifying phase – i.e. the period until retirement – from income that has already been taxed and does not take advantage of a tax incentive, the pension payment is only taxable at the income share. The share of earnings is calculated on the basis of the expected term of the VBL pension. Is determined after the age already completed at the time of retirement. As a general rule, therefore, the younger a pensioner is when he or she retires, the higher the proportion of income he or she will receive. However, the VBL pensioner does not have to worry about the calculation; the tax office determines the share of income.
An example: Klaus retires at the age of 63. If the pensioner reaches the age of. The income share of his VBL occupational pension is then 20 percent, so he must pay tax on 20 percent of the annual pension paid. If Klaus were to retire two years later, i.e. at the age of 65. If the pensioner were to reach the age of 65, his share of income would only be 18 percent.
If, on the other hand, a tax incentive such as the Riester incentive was claimed in the savings phase, the pension benefit from the VBL is fully taxable in old age. This principle is called downstream taxation.
Entering VBL pensions in your tax return
In addition to old-age pensions, the VBL supplementary pension fund also provides pensions for reduced earning capacity and surviving dependents, as well as compulsory and voluntary old-age pensions. This makes entering the VBL pension in Annex R somewhat complicated. Depending on the benefits one receives from the VBL in old age, the amounts must be entered in different lines of Annex R.
For this reason, the VBL sends out the so-called benefit notification every year in accordance with § 22 no. 5 sentence 7 of the Income Tax Act, which is intended to make it easier to complete the tax return.
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The VBL is required by law to certify to pensioners the benefits paid in the past calendar year. At the same time, the VBL informs the Central Office for Retirement Assets (ZfA) annually about the pension payments. The ZfA consolidates the data. Forwards it to the state tax authorities.
Benefit notification breaks down pension benefits paid
The benefit notification clearly breaks down the pension benefits paid per calendar year by type of taxation. Taxpayers can simply enter the amount assigned to a number in the respective line of the Schedule R thanks to benefit notification. You can also find the appropriate line there. In addition, the pension start date is noted on the benefit notice.
Attention: Only numbers that apply to the respective taxpayer are printed on the benefit notification. If, for example, you receive a current company pension due to old age, which is taxed at the rate of return, you only have an amount deposited in the current number 4. The taxation of pensions is complicated. It's easy to lose track. Our advisors. Consultants are fit when it comes to pensions. Here you can also find an advice center near you: Advisor search.