New 2024 Income Limits for Germany's Employee Savings Allowance: What You Need to Know

Starting in 2024, individuals with modest incomes who want to open a building society savings account (Bausparvertrag), pay off a property, or invest in a fund savings plan will benefit from significantly higher income limits for the employee savings allowance (Arbeitnehmer-Sparzulage). The current limits for building savings contracts—€17,900 for singles and €35,800 for married couples—date back to 1999. As part of the Future Financing Act (Zukunftsfinanzierungsgesetz), the German Bundestag has raised these thresholds to €40,000 in taxable annual income for singles and €80,000 for married couples, more than doubling the previous amounts.

Understanding the Employee Savings Allowance (Arbeitnehmer-Sparzulage)

The employee savings allowance is a state-granted monetary allowance under the Fifth Asset Formation Act (5. VermBG), designed to support asset accumulation among employees. It applies exclusively to employees, civil servants, judges, and soldiers. The benefit is conditional on employees building up asset-forming benefits (vermögenswirksame Leistungen or VL) through their employer and claiming them accordingly in their tax return.

"This signals to millions of dependent employees that it makes sense to start building assets early," welcome Christian König, Managing Director of the Association of Private Building Societies (VdPB), and Axel Guthmann, Association Director of the State Building Societies (LBS), the parliament's initiative. They emphasize that this is essential to later have enough equity for acquiring home ownership.

Key Details of the Allowance

The actual subsidy amount, however, is not high: currently, a maximum of €123.00 per year is possible. The legislator is not increasing the subsidy amount itself, only the income limits. The employee savings allowance is calculated as follows:

• For building savings contracts (Bausparvertrag) or home loan savings agreements: 10% of the annual savings deposits, up to a maximum of €70.
• For other eligible savings forms (e.g., fund savings plans, savings accounts): 20% of the annual savings deposits, up to a maximum of €80.

If both types of investments are used, the maximum total employee savings allowance for two contracts is €150 (€70 + €80).

How to Claim the Allowance: Important Rules

Savers cannot directly receive the state allowance as cash. The legislator has stipulated that the funds must actually flow into the savings vehicle, with corresponding blocking and waiting periods. As the Federal Ministry of Finance informs, the determined employee savings allowance is accumulated and only paid out when:

1. The savings contract reaches its maturity or the agreed savings period ends, or
2. The saver reaches the age of 60, or
3. Other specific payout conditions defined in the contract are met (e.g., using the funds for purchasing a home).

Strategic Considerations for Savers and Advisors

1. Check Eligibility: With the new, higher income limits, significantly more employees now qualify for this state subsidy. Review your taxable income to see if you fall under the new thresholds.
2. Maximize Employer Contributions: The allowance is tied to asset-forming benefits (VL) arranged through your employer. Ensure you are utilizing any available VL options your employer offers, as this is the gateway to the subsidy.
3. Choose the Right Vehicle: Decide whether a Bausparvertrag (for future home purchase/renovation) or another eligible savings form (like a low-cost ETF savings plan) better aligns with your financial goals. You can split your annual VL contribution to potentially claim both portions of the allowance.
4. Long-Term Perspective: Remember the funds are locked in. This tool is designed for long-term asset building, not short-term liquidity.
5. Tax Return Essential: To receive the allowance, you must claim the VL contributions and the calculated subsidy in your annual income tax return (Anlage VL).

While the absolute subsidy amount remains modest, the raised income limits represent a meaningful policy shift, acknowledging inflation and aiming to reincentivize long-term savings among a broader middle class. For financial advisors, this change opens a conversation starter about efficient asset-building strategies and the often-overlooked benefits of employer-sponsored savings schemes.