How does a severance payment affect my pension?
February 22, 2024 | 50,00 EUR | answered by Fanni Siebert
Dear tax consultant,
my name is Eiko Hartmann and I am currently in an uncertain professional situation. My employer has offered me a severance payment, as my position is to be eliminated for economic reasons. However, I am unsure about how this severance payment will affect my pension.
I have been paying into the statutory pension insurance for several years and want to ensure that the severance payment does not disadvantage me. It is important to me to be financially secure in old age and not to suffer any loss in my pension.
I am concerned that the paid severance payment could affect my pension entitlements and would like to know from you what impact a severance payment will have on my pension. Are there ways to minimize or offset these effects?
I would greatly appreciate if you could answer my questions regarding severance payment and pension during your online consultation. I want to be well-informed in order to make a well-founded decision regarding the severance payment.
Thank you in advance for your help and support.
Kind regards,
Eiko Hartmann
Dear Mr. Hartmann,
Thank you for your question regarding severance pay and retirement. It is understandable that you are concerned about how the severance pay will affect your pension entitlements. It is important to be well informed in order to make an informed decision.
Severance pay can indeed have implications on your pension. In general, severance pay is considered a one-time payment and can therefore affect your pension entitlements. The amount of the severance pay, as well as your age and previous pension contributions, are factors to consider.
When you receive severance pay, it is usually taken into account in your pension entitlement. This means that your pensionable periods may be shortened, as the severance pay is considered income. This can result in a lower pension payout.
However, there are ways to minimize the impact of severance pay on your pension. One option is to receive the severance pay in installments rather than as a lump sum. This can reduce the impact on your pension entitlement.
Another option is to invest the severance pay in a company pension plan or private pension insurance. This way, the severance pay can be tax-advantaged and have less impact on your statutory pension.
It is advisable to seek advice from a tax advisor or pension consultant before accepting severance pay, in order to assess the individual impact on your pension and take any necessary measures to secure your future.
I hope this information has been helpful to you. Please do not hesitate to ask further questions if you have any uncertainties. I am happy to assist you in making your decision.
Best regards,
Fanni Siebert
