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The pension fund plays a key role in your retirement provision. Purchasing pension fund benefits gives you the opportunity to make additional contributions in order to increase your retirement assets and benefit from tax advantages at the same time.
The pension fund, also known as occupational benefits insurance, is a key element of retirement provision. It supplements your benefits under Pillar 1 (OASI) and aims to secure your living standard in retirement. With joint contributions from employer and employee, you build up your personal retirement assets that are available to you on retirement in the form of a pension, a lump sum payment, or a combination of the two. For many people, the pension fund accounts for the largest part of their retirement provision. This is why it is particularly important to avoid bottlenecks in old age.
Purchasing pension fund benefits means that you take advantage of the opportunity to pay additional contributions into your occupational benefits insurance. These voluntary payments in excess of the regular contributions increase your retirement assets. Purchasing benefits closes gaps that arise, for example, due to an interruption in work (pregnancy, studies, unemployment) or due to part-time work. Salary increases, changes of employer, or career leaps can also create additional purchasing potential due to changes in the pensionable salary or contribution rate.
Regular contributions to the pension fund, on the other hand, are made monthly through deductions from the employee’s salary and through contributions from the employer. These contributions are compulsory and are calculated as a percentage of the pensionable salary.
The legal framework for purchases of pension fund benefits is set out in the Federal Act on Occupational Old Age, Survivors’ and Invalidity Pension Provision (OPA) (in German). Purchases may only be made up to the statutory maximum. This maximum is based on the applicable occupational benefits fund regulations and is shown on the pension fund certificate. For AXA insureds, this maximum amount can also be accessed via the pensions portal on myAXA.
Purchasing pension fund benefits offers you various advantages:
Depending on the pension plan, purchasing benefits can also have a positive impact on benefits in the event of disability or death. At AXA, insureds can view this effect in the pensions portal.
If advance withdrawals have been made for the purchase of residential property, benefits can only be purchased once the corresponding advance withdrawals have been repaid. Surrendering an advance withdrawal for the purchase of residential property is integrated into the mandatory or extra-mandatory portion of the retirement assets from which they were paid out in the same proportion.
The pension fund (Pillar 2) and Pillar 3a are two key components of our pension system. A short overview of the two solutions:
The pension fund and Pillar 3a differ in the following points:
Tax advantages: both pension fund purchases and Pillar 3a contributions can be deducted from taxable income. However, the maximum amount for Pillar 3a is generally lower than possible purchases of pension fund benefits.
The closer you get to retirement, the greater the tax savings effect by purchasing pension fund benefits. In general, however, you can also voluntarily purchase pension fund benefits at a young age and benefit from them.
Flexibility and availability: with both solutions, you are not free to dispose of the assets you have saved. You are only allowed to withdraw money from them early in three exceptional cases: Purchase of residential property, switch to self-employment or emigration abroad. With a pension fund, you can choose between an annuity or a lump sum; with Pillar 3a, you can only withdraw a lump sum.
Return and security: if you invest in a pension fund, the fund takes care of all the management and investments for you and generally invests your money very securely. An attractive interest rate can make this option particularly appealing for risk-averse people. With Pillar 3a, on the other hand, you are in control and can choose a high-risk or low-risk investment strategy depending on your personal risk exposure.
You can only pay into the pension fund up to a certain maximum amount, as the law prescribes certain limits. Your potential purchases are calculated from the difference between the assets actually saved and what would have been possible if you had always paid in full from the age of 25 onwards. This amount is shown on the pension fund certificate that you receive every year. Before you purchase any benefits, you must submit an application to your pension fund so that the actual possible purchase amount can be calculated.
But note that after making a purchase, you should not withdraw any money from your pension fund as a lump sum for the next three years. If you do so anyway, you will have to pay back the tax advantage you gained from the purchase. This three-year blocking period applies to all types of lump sum withdrawals: Advance withdrawal for the purchase of residential property (WEF), self-employment, relocation abroad or retirement. This blocking period does not apply to annuities. Purchases of pension fund benefits are therefore possible until shortly before retirement, provided you opt for an annuity rather than a lump sum or partial lump sum withdrawal.
Purchases of pension fund benefits are generally possible until the maximum pension capital is reached. Depending on the purchase amount, the individual payments and their timing can be planned individually. But note that some pension funds charge fees after a certain number of purchases. It can therefore make sense not to pay in several small amounts within a year. Instead, it’s worth investing a larger amount on a staggered basis over several years in order to benefit from higher tax savings.
It’s important for you to refer to the regulations of your pension fund. These form the basis for how often and how much you can purchase benefits.
Early retirement is possible once you reach age 58, provided that the regulations of your occupational benefits institution permit you to do so. However, you will receive a lower pension than if you were to work until the regular retirement age.
You can minimize this reduction in whole or in part by purchasing pension fund benefits. The gap to be closed corresponds to the difference between the regulatory pension at regular retirement age and the pension at early retirement age.
Nadine Graf is a theme manager and writes texts for AXA on topics related to insurance and beyond.
