Entitlement to asset-building benefits: Your path to state-funded wealth accumulation
24 Jun 2025
5
Minutes
Katrin Straub
CEO at nextsure
Many employees in Germany are entitled to capital-forming benefits but often do not know how to use them optimally. Learn how to create a substantial financial cushion with up to 40 euros monthly from your employer and attractive state subsidies.
The topic in brief and concise terms
Almost every employee is entitled to capital-forming benefits (VL) of up to 40 euros per month from the employer.
State subsidies such as the employee savings allowance (up to 80 euros) and housing construction premium (up to 70 euros) significantly increase returns.
The income limits for the employee savings allowance were increased to €40,000 (single individuals) and €80,000 (married couples) in 2024. [3,5§13]
Quick Facts about eligibility for capital-forming benefits – A brief overview
Asset-building benefits (VL) are financial contributions from your employer that help you accumulate wealth. The amount is often up to 40 euros per month, or 480 euros per year. Nearly every employee, trainee, civil servant, judge, and soldier may be entitled to asset-building benefits. To receive VL, you must enter into a VL-eligible savings contract and inform your employer of this. The state further supports VL savings with the Employee Savings Allowance and, in some cases, with the Homeowner’s Grant. These subsidies can increase your savings performance by a few percentage points. The exact conditions for entitlement to asset-building benefits can often be found in the collective agreement, the company agreement, or your employment contract. Take this opportunity to actively shape your financial future, for example with a company pension scheme. Knowing these basics is the first step to your additional wealth.
Your Path to VL – Requirements and Application in Practice
Check Eligibility: Who is Entitled to the Benefits?
Whether you are entitled to employee investment benefits depends on various factors. In many industries, entitlement is stipulated in collective agreements, but it can also arise from a company agreement or directly from your employment contract. Employers can also voluntarily pay such benefits even if there is no legal obligation. Part-time employees often receive benefits proportionally, according to their working hours. It is therefore worthwhile to check with your employer or HR department to see if you are entitled to employee investment benefits and in what amount. Usually, the entitlement begins after six months of employment.
Choose a Savings Plan: What Investment Options are Available?
If you are entitled to employee investment benefits, you can choose from a variety of investment options. The most common are:
Building savings contracts: Ideal for future property owners, as they are often supported with employee savings bonus and housing construction premium. They offer fixed interest rates for savings and loan accounts.
Fund savings plans (e.g., equity funds, ETFs): Offer higher return opportunities, but are also associated with higher risks. They are supported with the employee savings bonus.
Bank savings plans: A safe but often less lucrative option that is generally not state-supported.
Repayment of a mortgage loan: Existing property loans can be repaid faster with these benefits, which are also eligible for the employee savings bonus.
Company pension schemes: Benefits can also be allocated to certain forms of company pension schemes.
The choice of the right investment option depends on your risk tolerance and your savings goals. A private pension insurance can be another pillar of your retirement planning.
Step-by-Step Guide to Application
Applying for employee investment benefits is straightforward. Simply follow these five steps:
Ask your employer or HR department if you are entitled to these benefits and in what amount.
Inform yourself about the various investment options and choose the one that suits you best.
Conclude a savings contract eligible for the benefits with a provider of your choice.
Provide a copy of the savings contract to your employer.
Your employer will then transfer the benefit amounts directly into your contract.
This is how you can securely and effectively obtain the additional benefits. The next section shows how to make optimal use of government incentives.
Make the most of government subsidies – Get more out of your VL
Employee Savings Bonus: Up to 80 Euros Extra from the State
The Employee Savings Bonus is a government incentive for your entitlement to Capital Forming Payments. As of 1 January 2024, new, higher income thresholds apply: For single individuals, the limit is a taxable annual income of 40,000 Euros, and for married couples, it's 80,000 Euros. [3,5§13] The amount of the bonus depends on the form of investment: For equity funds savings plans, there is a bonus of twenty percent on contributions up to 400 Euros annually (maximum bonus 80 Euros). For building society contracts or the repayment of a construction loan, the bonus is nine percent on up to 470 Euros (maximum bonus 43 Euros). For example, if you contribute 400 Euros annually into an equity funds savings plan, you will receive an 80 Euro bonus.
Home Ownership Savings Premium: Additional 70 Euros for Savers
If you invest your capital forming payments in a building society contract, you can receive the Home Ownership Savings Premium in addition to the Employee Savings Bonus. There are separate income limits for this: 35,000 Euros for single individuals and 70,000 Euros for married couples. The premium is ten percent on annual contributions of up to 700 Euros (single individuals) or 1,400 Euros (married couples). This means a maximum annual premium of 70 Euros or 140 Euros. It's important that you also make your own contributions for the Home Ownership Savings Premium, which go beyond the basic capital forming payments, provided the capital forming payments have already been utilised for the Employee Savings Bonus. This premium is another incentive to consider through an endowment life insurance policy or other savings methods.
Topping Up is Worthwhile: Personal Contributions for Maximum Benefits
If your employer contributes less than the maximum eligible amount for Capital Forming Payments, you can top up the difference out of your own pocket. This is particularly prudent to maximise the state benefits. For instance, if the employer's share is only 20 Euros monthly (240 Euros annually) for an equity funds savings plan, you could add an additional 13.33 Euros monthly (160 Euros annually) yourself to reach the eligible amount of 400 Euros and receive the maximum Employee Savings Bonus of 80 Euros. This flexibility makes the entitlement to Capital Forming Payments a valuable tool for your investment strategy. With these optimisations in mind, let's now take a look at the legal details.
Expert Knowledge on Capital-Forming Benefits – Legal Foundations and Special Cases
The Fifth Capital Formation Act (5. VermBG) as a Basis
The legal basis for the entitlement to capital-forming benefits is provided by the Fifth Capital Formation Act (5. VermBG). This Act sets out in detail who is entitled (§1), which investment forms are permitted (§2), and the conditions under which the employee savings allowance is granted (§13). It also includes the option to invest parts of one's own salary in a capital-forming manner (§11) or to freely choose the form of investment (§12). Knowing these paragraphs helps you to fully exploit your rights and opportunities. The law was last amended on 2 December 2024, with the adjustment of income limits in §13 becoming relevant for capital-forming benefits from 1 January 2024.
Capital-forming Benefits for Specific Groups: Trainees, Part-time Employees, Public Sector
The entitlement to capital-forming benefits and their amount can vary for certain groups of people:
Trainees: Often have a collectively agreed entitlement, for example, 13.29 euros per month. They can also receive state subsidies.
Part-time Employees: Typically receive capital-forming benefits pro-rated to their working hours. Making additional contributions from their own pocket can often be particularly worthwhile here.
Employees in the Public Sector: Here, collective agreements (e.g., TVöD, TV-L) or special laws (for civil servants, judges, soldiers) govern the entitlement. The amounts are often 6.65 euros per month. For employees under the savings bank collective agreement, it can also be 40 euros.
It is advisable to examine the specific regulations for your own occupational group carefully. The 3 Tiers of Pension Provision provide a good framework for classifying capital-forming benefits.
Contract Duration, Termination, and Employer Change
Capital-forming benefit contracts typically have a term of seven years. This usually consists of six years of contribution phase and a subsequent year of rest (lock-in period). After this period, you can generally freely dispose of the accumulated assets. Early termination is possible, but it often leads to the loss of state subsidies and may incur fees. There are exceptions, such as marriage or extended unemployment, where termination without losing subsidies is possible. If you change employers, your capital-forming benefits contract remains; you should check with your new employer whether they will continue the payments. A direct insurance may also be affected by such regulations. These aspects are important for long-term planning.
Our expert tip: Review your capital-forming benefits contracts and income situation at least every two years. Adjust your strategy as needed to ensure you always receive the optimal support and achieve your savings goals. Changing the form of investment or adjusting personal contributions can be sensible if your life circumstances change.
Conclusion: Your entitlement to capital-forming benefits as a valuable component of your financial planning
The entitlement to capital-forming benefits is more than just a small perk from the boss – it is an effective way to build wealth with manageable effort and government support. With amounts of up to 40 euros monthly from the employer and additional government allowances such as the employee savings allowance of up to 80 euros and the home savings premium of up to 70 euros annually, a substantial sum accumulates over the years. The various investment forms offer suitable options for every savings goal and risk appetite, from secure building savings contracts to return-oriented fund savings plans. Make active use of your entitlement and find out about the best conditions for you. It is a simple step with a significant impact on your financial future. Also, consider how VL can supplement your unit-linked pension insurance. We at nextsure are happy to support you in analysing your individual situation and finding the right solutions for your wealth creation.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific suggestions for optimisation.
More useful links
The Federal Ministry of Finance offers a letter on the application of the Fifth Law on Wealth Formation (VermBG).
On Gesetze im Internet, you can find the law on employee wealth formation (Wealth Formation Act).
The Consumer Centre provides comprehensive information on asset-building benefits.
A press release from the Federal Statistical Office (Destatis) provides current data.
The Bundesbank publishes a study on wealth in Germany.
Wikipedia offers a comprehensive article on asset-building benefits.
The Federal Agency for Civic Education (bpb) provides a lexicon entry on asset-building benefits.
Another law concerning asset-building investment of savings, the Federal Housing Allowance Act, is available on Gesetze im Internet.
The Federal Ministry of Finance offers a glossary entry on asset-building benefits.
FAQ
Does my employer have to pay assets-forming benefits?
There isn't always a general legal entitlement. The obligation to pay often stems from collective agreements, company agreements, or the employment contract. Some employers also pay VL voluntarily.
Are capital-forming benefits taxable?
Yes, capital-forming benefits are part of the salary and are therefore subject to income tax and social security contributions. However, the government allowances are tax-free.
What happens to my VL when I change employers?
Your VL contract remains in your name and continues if you change employers. You should clarify with your new employer whether they will continue the contributions to the existing contract.
Can I cancel my VL contract early?
Early termination is usually possible, but typically results in the loss of the state employee savings bonus and may incur costs. There are exceptions (e.g., marriage, unemployment) where termination without losing benefits is possible.
Which investment form is the best for my VL?
The best type of investment depends on your individual goals and risk appetite. Building savings contracts are suitable for real estate plans, while fund savings plans offer higher return opportunities. Seek advice to make the best choice.
How do I apply for the employee savings bonus?
You apply for the Employee Savings Bonus annually through your income tax return. Your financial institution transmits the necessary data electronically to the tax office, after you have given your consent. [4,5§13,§15]
