What impact does company pension provision have on the payslip?
September 16, 2023 | 40,00 EUR | answered by Claudia Köhler
Dear tax consultancy,
My name is Nina Richter and I work in a medium-sized company. I recently decided to set up a company pension scheme to secure my future. Now I am wondering what impact this will have on my payroll.
Currently, I receive my monthly salary without any deductions, as I have not yet set up a company pension scheme. However, I am not sure if this will change once I start with the company pension scheme. I am worried that my net salary could significantly decrease due to the contributions to the company pension scheme, and that I may suffer financial losses as a result.
Can you please explain to me how a company pension scheme will affect my payroll? Will my net salary actually decrease, and if so, by how much? Are there any ways to compensate for this or improve my financial situation?
Thank you in advance for your help.
Sincerely,
Nina Richter
Dear Mrs. Richter,
Thank you for your question regarding the impact of company pension schemes on your payroll. It is understandable that you are concerned about how contributions to company pension schemes will affect your net salary and whether there are ways to compensate for any financial losses.
First of all, it is important to know that contributions to company pension schemes are usually tax and social security contributions free. This means that you can deduct contributions to company pension schemes from your gross salary without them being taxed. As a result, your taxable income decreases and so does the amount of taxes you have to pay. Social security contributions, such as pension insurance, are also only levied on the remaining income after deducting contributions to company pension schemes.
Usually, this results in your net salary changing only minimally or not at all when you make contributions to company pension schemes. It may even be the case that, due to the tax and social security contributions exemption, you end up with more net income available, as you have to pay less taxes.
However, there are cases where your net salary may actually decrease if contributions to company pension schemes are very high and your taxable income significantly decreases as a result. In this case, you may be able to negotiate with your employer to have them cover a portion of the contributions to company pension schemes to improve your financial situation.
Therefore, it is advisable to contact your employer or a tax advisor to clarify exactly how company pension schemes will affect your payroll and what options are available to avoid or compensate for financial losses.
I hope this information has been helpful to you, and I am happy to assist with any further questions.
Best regards,
Claudia Köhler
