Riester, Riester promotion, incl. Wohnriester, ...
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Retirement allowance and Mindesteigenbeitrag
The pension expense consists of own contributions and allowances. In this case, at the request of the claimant, the state allowance is credited directly to the beneficiary contract by the Federal Insurance Institution for Employees as the Central Pension Office (ZfA), ie the entitled person pays only his own contributions. Depending on the pension contributions made, a supplement is paid. The allowance consists of basic allowance and, where appropriate, a child allowance.
The entitlement to the allowance arises in accordance with § 88 EStG at the end of the calendar year in which the pension contributions have been paid (contribution year).
The basic supplement is:
in the years 2002 and 2003 – up to – 38 €;
in the years 2004 and 2005 – up to – 76 €;
in the years 2006 and 2007 – up to – 114 €;
from the year 2008 – up to – 154 €.
In the case of spouses, the basic allowance is payable separately, provided that both spouses have concluded their own pension contracts and pay their own minimum contributions. This also applies if the spouses do not live permanently separated and only one spouse belongs to the beneficiary group and makes his / her minimum contribution. In this way, the spouse, who is in principle not eligible for his or her pension plan, can also receive the state allowance.
The child allowance is for each child for which the person eligible for the allowance receives child benefit or a tax-exempt amount is entered on the tax card since 2008 annually – up to – 185 euros. For children born in 2008, the allowance is € 300 per year.
For spouses who do not live permanently separated, the child allowance is always assigned to the mother, unless both spouses apply for imputation to the father (§ 85 (2) EStG). This declaration is only valid for one contribution year. The entitlement to a child allowance does not apply to the assessment period for which the total child benefit is reclaimed.
Minimum own contribution and base amount
The allowances (basic supplement and / or child allowance) are reduced if the entitled person does not make the minimum contribution according to § 86 EStG.
Since 2008, the Mindeseigen contribution amounts to 4.0 per cent of the sum in the previous calendar year
earned pensionable income i. S. of the SGB VI,
salary and remunerations (for example, basic salary, family allowance, allowances and so on, that is to say, all elements that would be considered as the contribution base to insured employees),
income received by uninsured or compulsorily exempted employees or by salaried officials, judges, professional soldiers and temporary servicemen who would be liable to pay contributions, if the freedom of insurance did not exist in the statutory pension scheme,
However, no more than the amounts listed in § 10a (1) sentence 1 EStG, which can be claimed as a special deduction, the allowance is reduced in accordance with §§ 84, 85 EStG.
In cases where only one spouse belongs to the favored group of persons, the minimum own contribution according to § 79 s. 1 EStG beneficiaries, provided that both spouses have their own retirement provision, taking into account the allowances due to the spouses.
An insured person, single, not a child, earned a contributory income of 50,000 euros in 2007. The minimum own contribution for 2008 is as follows:
4 percent of 50,000 euros = 2,000 euros
maximum amount = 2,100 euros (see Special Issue Deduction
to be set = 2,000 euros
less allowance (base supplement 154 euros) = 154 euros
The minimum own contribution is (2.000 Euro – 154 Euro) = 1.846 Euro)
If the pension contribution of this insured person is only 1,000 euros, the allowance will be reduced accordingly.
4 percent of 50,000 euros = 2,000 euros
maximum amount (see special deduction) = 2,100 euros
to be set = 2,000 euros
less allowance (base supplement 154 euros) = 154 euros
The minimum own contribution is (2,000 euros – 154 euros) = 1,846 euros
Amount paid 1,000 euros
The proportional allowance amounts to 83.42 Euro (1.000 Euro x 154 Euro: 1.846 Euro).
A couple with 2 children (older than 3 years, child allowance is paid) concludes 2 retirement plans. In 2007, the husband received salary of 60,000 euros, the wife had no income. The minimum own contribution for 2008 is as follows:
4 percent of 60,000 euros = 2,400 euros
maximum amount (see special deduction) = 2,100 euros
to be set = 2,100 euros
minus allowances (section 86 (1) sentence 2 second sentence of the EStG)
Basic supplements (2 x 154 euros) = 308 euros
Child allowances (2 x 185 euros) = 370 euros
The minimum own contribution is (2,100 euros – 678 euros) = 1,422 euros
Distribution of supplements:
o pension agreement of the official (here: husband) 154 euros
o Pension provision according to § 79 sentence 2 EstG 154 euros
o Beneficiaries (here: wife) 370 euros
The following principles apply to determining the minimum contribution:
o The previous year will be closed even if the revenues in the savings year are significantly lower.
o Furthermore, several different incomes (for example, pay or compensation such as sickness benefits, etc.) must be added together.
o If a wage replacement benefit is received, the payment amount of the benefit is used as the basis of assessment.
o For persons whose actual income is lower than the contributions subject to compulsory contributions (eg persons in a workshop for disabled persons) to be taken into account for this group of persons in the statutory pension insurance, the actual remuneration is also decisive.
We can gladly elaborate further examples with your example in a personal consultation!
Since 2008: New one-time bonus for under 25s
For children and adolescents there are different forms of supplement:
• The child supplement with 185 € for each child
• or the child allowance of € 300 per year for all children born on or after January 1, 2008.
Since 2008, all young people under the age of 25 receive an additional bonus of € 200 for a basic supplement.
The only thing that matters is that the young person is not yet 25 years old at the beginning of the contribution year. So if he turns 25 in the current year, but before the contract is over, then there is the grant. Bad luck for those who have their birthday on the 1st of January and then turn 25. You must have applied for the old-age pension supplement in the previous year (§ 84 sentence 2 and 3 EStG 2008).
A special application is not required because the basic supplement automatically increases with the pension supplement applied for. However, the full minimum bonus of 4% of the previous year’s income (up to a maximum of 2,100 €) must be paid for the full bonus. If not, the bonus will be proportionally reduced. Unfortunately, in later years, no additional contribution can be made to replenish the abridged bonus.
• If you start an apprenticeship and therefore did not have a social security income in the previous year, you have to pay at least 60 €.
• Those who had an income of € 12,000 as a single person last year only have to pay € 126. That corresponds to the 4% of the income (here: 12,000 €), thus corresponding to 480 €. The basic allowance of 154 € and the bonus of 200 € are deducted from this. The minimum contribution in the first year is thus only 126 € with a total supplement of 354 € – a good deal.
3 x advantage “Youth”
Under certain conditions, parents and adolescents can even receive a supplement three times. We assume that the “child” is still under 25 years old, is in education (apprenticeship, vocational academy, traineeship) and has no own income of more than € 7,680 per year.
• Advantage parents: parents get on their Riester contract, the child allowance of 185 €. The amount of allowance also reduces the minimum amount (4% of the previous year’s income) of the parents, who accordingly have to pay less.
• 1. Advantage child: If the child has its own Riester contract, it receives the basic allowance of 154 €. Since it is compulsorily insured as a trainee in the statutory pension insurance, it is also entitled to the Riester subsidy. This also applies to civil servant candidates.
• 2. Advantage child: As mentioned above, the child or the young person will get from 2008, the new job starter bonus of a single € 200.
• 3rd child benefit: If the child even has a child and is born in 2008, this child will also receive a child allowance of 300 €, which will be credited to his Riester contract.
Up to € 839 can be the government subsidy, in most cases at least € 539. These are amounts worth pondering about “riots”.
The Riester property
Since 2008, builders and apartment buyers get the Riester allowances for pensions, because the Riester promotion has now been extended to the purchase of real estate. The promotion, which is also known as the homeowner’s pension, is intended to cushion the abolition of the homeowner’s allowance.
What is new is that a fortune can be used as equity, which was saved on a Riester contract. In addition, homeowners receive all allowances and tax benefits for the repayment of their loan, as they also apply to a classic Riester savings contract.
With this legal reform, which took years to prepare, it is now possible to acquire residential real estate or shares in housing cooperatives or to pay off loans that serve real estate financing. In total, you can use up to 100% of the accumulated assets from your Riester contract.
Residential Riester is worthwhile!
Critics consider the new home promotion complicated, hard to place and a bureaucratic monster. And they are not so wrong. Nevertheless, the bottom line can be talked of a worthwhile investment in their own retirement.
Anyone who pays their house over a period of 20 years as a family with two children receives up to € 13,560 in Riester supplements. The allowances are added to the loan account and immediately reduce the debt. Thus, the family saves with an assumed loan rate of 5.5 percent on top of about 10,000 € interest. If the children were born after 2007, the allowances increase to 18,160 €. Likewise, the additional interest savings will increase to € 13,500.
And because the allowance directly reduces the loan amount, interest in the amount of the effective interest rate of the loan is saved. In any case, the repayment of a loan is always the better form of investment and no savings contract brings an almost as high guaranteed return.
However, it is also not without conditions, to which a promotion is linked. Because
• Owners must use the house or apartment for their own living and
• have their primary residence and food spot there.
• The property must be located in Germany and may only be manufactured or purchased after 31.12.2007.
Allowances for loan repayment
All the benefits of the Riester subsidy are for loans that the real estate owner receives for a property that he bought or completed after 2007. In addition, it must be paid back by the age of 68 at the latest. Only those loan agreements that are certified by the BaFin (Federal Financial Supervisory Authority) can be accepted.
To be funded:
• certified investment savings plans,
• mortgage loans,
• Bauspar contracts and
• Combined loans from a home savings contract and a repayment-free loan. Here, the beneficiary pays instead of the redemption contributions to a new Bauspar contract. As soon as the home savings contract is ready for rationing after a few years, it will replace the advance loan with the agreed Bauspar sum.
The state promotes redemption and building savings as well as deposits on a classic and certified investment Riester contract. Here, the amount of allowances, the required own contribution and the possible tax benefits are the same as e.g. at the conclusion of a subsidized pension insurance.
Spouses have their own independent claim to a grant. Therefore, they have to conclude separate loan agreements.
Wohnförderkonto: Arrangement of Downstream Taxation
As with all Riester contracts applies: The deposits in the Riester Treaty are tax-free and then pay taxes are payable. The problem of the subsequent taxation should be solved so that a fictional housing subsidy account (“shadow account”) is created for residential Riester savers. Fictitious, because only as if the deposits were a Riester contract would be spared.
The “shadow account” is intended to “book” capital raised and subsidized over the years at a rate of 2 per cent of notional interest. The resulting final amount is subject to income tax as a fictitious life annuity when receiving the pension. Residential Riester savers can tax the tax for a period of up to 25 years or even repay with a 30 percent discount immediately upon retirement. The tax liability can therefore be repaid as one-off taxation on only 70 percent of the notional capital. The subsequent taxation must be completed by the age of 85 at the latest. If the Riester saver dies beforehand, the tax payment from the heir must be paid.
Income tax at the residential Riester and abandonment of self-use
Riester savers who give up the self-use of residential property in the housing Riester within the Ansparphase or within the pension phase, have the remaining amount of the housing promotion account – with the individual tax rate – as “other income” post tax. Such harmful use is given if the residential property is sold, rented, given away or given to relatives free of charge or if the Riester saver dies before the age of 85.
order to avoid cases of hardship, it has been included in the annual tax law 2009 that the sickness-related or care-related absence of the entitled person does not constitute a harmful use. However, the person entitled to the allowance must remain the owner of the dwelling and the dwelling may not be made available for use to any third party – with the exception of the spouse in case of a joint assessment.
The cornerstones of the Eigenheimrentengesetz are:
• Up to 100 percent of the capital saved (including Riester funding) may be used for the self-immovable property
• Redemption payments (such as a special repayment) are also possible with Riester capital, including allowances and tax deductions. Thus, the entire Riester capital can be used in the payout phase to debtor a self-used residential property.
• Alternatively, the maximum possible Riester savings (including allowances) amounting to 2100 euros per year can be claimed in the tax.
• the withdrawn capital does not need to be repaid.
• the purchase of cooperative shares is also favored.
• Anyone who has already saved a pension fund with state subsidies can use part or all of them to buy or build an apartment for their own living purposes. The same applies to the acquisition of cooperative shares.
• The Riester saver may choose whether to tax for up to 25 years (or later) or pay the tax in one fell swoop.
• For immediate repayment, there is a discount of 30 percent. This means that only 70% of the funded capital should be subject to income tax at the individual tax rate.
• People who already receive a disability pension are also eligible.
• Funded credit on a Riester contract is “Hartz IV safe”, i. the credit is not taken into account when calculating the basic security and does not have to be used up.
• Building societies develop savings contracts that meet the requirements of the residential Riester
• A housing premium is also available at the Wohnriester, but only if the paid-in capital is invested in the home. So far, the housing premium can be used for other purposes after the expiry of the retention period of 7 years.
According to the Housing Premiums Act, contributions to building societies to obtain construction loans for new contracts are only subsidized for housing use. For reasons of protection of legitimate expectations, the restriction of premium relief does not apply if the home savings contract has been concluded before 1 January 2009. In Wohn-Riester, the Housing Premiums Act is thus geared exclusively to housing measures.
Riester and European law
The self-inhabited property had to be occupied according to the original law in Germany, so that the Riester money can be used for self-occupied home. The European Commission sees this as a violation of European law. It has therefore appealed to the European Court of Justice and its claim was granted in September 2009. If the owner-occupied house is built on Lake Garda, Riester money may now be used for this purpose.
After the judgment of the European Court of Justice Germany had to change the Riester pension in essential points. These include, in particular, regulations that tie the benefits of the Riester pension to a German residence. These include, for example, cross-border commuters, i. People who work in Germany, but live in other EU countries and therefore pay their income tax there (residence principle). In addition, retirees can now keep their Riester allowances when they spend their twilight years abroad. This includes both the “Mallorca retirees” and those who have retired to their homeland.
An important point is the promotion of home ownership abroad. The highest European court has also clarified that Riester allowances may also be used for the purchase of a home or apartment abroad. Thus, the promotion of real estate in the EU or in the EEA countries is possible. The state Riester subsidy can also be used for the purchase or construction of a property, such as the finca or apartment in Mallorca. The apartment or finca may not only represent the second home or be used as a holiday apartment.