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Capital-forming benefits: This is how you save with them

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Capital-forming benefits: This is how you save with them

We will explain to you how you can build up wealth with the help of your employer. Getty Images / SrdjanPav

Capital-forming benefits are money you receive from your employer on top of your salary. Up to 480 euros per year are possible.

You can choose between different savings options, for example building loan contracts, bank savings plans or savings plans for equity funds.

We will explain to you who is entitled and how you can request the payments.

Did you know that you can get more money from your employer on top of your salary? This is through capital-forming benefits that can help you save. We will explain to you exactly what these benefits are, who is entitled to receive them and how you can use them to build up your wealth.

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What are capital formation benefits?

The term capital-forming benefits (abbreviated: VL or VwL) describes money that you receive from your employer in addition to your salary. Possible are According to the consumer portal of the General Association of Insurers (GdV) up to 40 euros per month – projected over a year, that would be 480 euros extra. The amount of your salary is irrelevant. These types of payments are mostly according to the Federal Agency for Civic Education, laid down in collective bargaining agreements or company agreements. However, capital-forming benefits are voluntary payments, which means that your employer is not obliged to pay them to you.

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In addition, you don’t get the money transferred to your account together with your salary like they do Bafin explained. Instead, the employer transfers the payments directly into the form of investment you have chosen (you can find out more about the individual savings options below). The contracts for capital-forming benefits usually have a term of seven years, after which you have access to your money. However, it is also important that the services are subject to tax and social security contributions, according to the OLB-Bank.

Who is entitled to it?

As employees, civil servants, judges, soldiers and trainees, you are generally entitled to receive capital-forming benefits. explains the building society LBS. However, you should clarify whether and to what extent your employer actually pays them.

What savings are there?

According to the Sparkassen-Finanzgruppe you can choose between different savings options, for example home savings contracts, bank savings plans or savings plans for equity funds. It is also possible to repay current real estate loans. You are free to choose which capital-forming benefit you would like. However, each option has advantages and disadvantages, explains the Sparkassen-Finanzgruppe:

At home savings contracts you are protected against rising interest rates, but you only get relatively low interest rates during the savings phase.

Bank savings plan have no risk of fluctuation, but you will not get any employee savings bonus here and the interest rates are also low.

Stock fund savings plans offer you the chance of higher returns and high government subsidies, but price fluctuations represent an increased risk. Do you decide for them Repayment of current real estate loansso you save interest on loans, but only get a small government subsidy.

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How exactly you invest the capital-forming benefits depends on which savings option suits you best.

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How does the application work?

Once you know your employer will pay the benefits and you’ve decided on a savings opportunity, you can start applying. According to OLB-Bank, this is not particularly complex. You must have concluded a contract for capital-forming benefits – for example with a bank. You have to forward this to your employer for confirmation so that he can pay the money directly into your savings option.

This is how you can top up capital-forming benefits

If your employer does not pay the maximum amount of 40 euros per month, you can contribute the remaining money yourself, i.e. top up the payments. The difference will then be deducted from your net salary.

This can be worthwhile for you: You save more money over the entire contract period because the full amount of 40 euros is paid in monthly. And if you’re eligible for government funding, you’ll get more of it. Because it is calculated as a percentage of the savings amount – up to a certain maximum, so „Finanztip“.

What is the government grant?

Government funding can also help you build your wealth. However, not all forms of investment are eligible for this subsidy. According to this, you can receive government funding if you have decided on a home savings contract, a savings plan for equity funds or the repayment of a current real estate loan.

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In addition, according to the GdV, there are certain income limits for the funding. These differ depending on which savings contract you have chosen and whether you are single or married:

type of plantIncome limit singleincome limit marriedBuilding savings contract17,900 euros35,800 eurosRepayment of current real estate loans17,900 euros35,800 eurossavings plan for equity funds20,000 euros40,000 eurosHere you can see the income limits for the subsidy.

No matter which savings option you choose, capital-forming benefits can be worthwhile and help you build your wealth.

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