The German Pensionsfonds is a legally independent form of pension fund that gives your employees legal entitlement to future benefits. Pensionsfonds are regulated by the German Federal Financial Supervisory Authority (BaFin) and are subject to different investment restrictions than a German pension fund in the form of a Pensionskasse or direct insurance that allow them to, for example, invest a greater proportion of their assets in shares. Contributions to a Pensionsfonds are exempt from taxes and social security up to a limit of 4 per cent of the income threshold for government retirement pension contributions. An additional fixed allowance of EUR 1,800 can also be claimed. This fixed allowance is exempt from taxes, but not exempt from social security contributions.
The Pensionsfonds form of pension fund plays a particularly important role in Germany for moving pension provisions off a company’s balance sheet. A Pensionfonds can be used to transfer pension obligations from defined benefit pension schemes and support funds out of a company without incurring taxes. Once this transfer of pension obligations has taken place, the provisions can be removed from the company’s balance sheet. The company makes a one-time payment to the Pensionsfonds and transfers its pension commitments. The Pensionsfonds assumes the existing pension commitments and invests the funds.