Can I deposit my severance payment into a company pension plan in a tax-efficient way?
October 11, 2022 | 50,00 EUR | answered by Lorenzo Zimmermann
Dear tax consultant,
my name is Björn Böhm and I urgently need your help regarding my severance payment. I was recently terminated by my employer and offered a severance payment. Now I am wondering if it is possible to tax-efficiently contribute this severance payment to a company pension plan.
Currently, I am unsure whether I should have the severance payment paid out directly, or if it would be more tax advantageous to contribute it to a company pension plan. I am worried that I may end up paying too much taxes and would like to explore all possibilities to secure my assets as best as possible.
Could you please explain to me if it is possible for me as an employee to contribute the severance payment tax-efficiently to a company pension plan? What are the benefits of such a measure in terms of taxation and securing my assets? Are there specific requirements that I need to meet in order to be able to contribute the severance payment to the company pension plan?
I would be very grateful if you could assist me in this important matter and show me possible solutions.
Thank you in advance.
Sincerely,
Björn Böhm
Dear Mr. Böhm,
Thank you for your inquiry regarding your severance pay and the possibility of depositing it tax-efficiently into a company pension plan. Indeed, there is the option to deposit a severance payment into a company pension plan to take advantage of tax benefits and secure your assets in the best possible way.
In principle, a severance payment can be deposited into a company pension plan in a tax-advantaged manner. This is done through a so-called salary conversion, where a portion of the severance payment flows directly into a company pension plan. This amount is then not treated as taxable income, which means you have to pay less taxes.
The advantages of depositing the severance payment into a company pension plan primarily lie in the tax benefits. In addition, you are securing your assets long-term and building an additional retirement plan. Furthermore, you can benefit from the return opportunities that a company pension plan can offer.
In order to deposit the severance payment tax-efficiently into a company pension plan, certain conditions must be met. These include compliance with tax-free allowances and adherence to the annual maximum limits for contributions to the company pension plan. It is therefore advisable to inform yourself in advance about the conditions and, if necessary, consult an expert such as a tax advisor.
I hope that this information has been helpful to you and I am available for any further questions. Please do not hesitate to contact me again if needed.
Best regards,
Lorenzo Zimmermann
