Plans by the German government to scrap a tax break on life insurance policies as part of pension reforms were dealt a blow last Friday after the parliament’s upper house rejected the proposal.
At present, investors in such policies, which pay out a lump sum or annuity on maturity, are exempt from taxation if they have held the savings plan for a minimum of twelve years.
In a bid to encourage more Germans to save for their retirement however, the government wants to withdraw the tax exempt status of life insurance funds, and tax pensions at retirement instead of at the contributions stage.
Opposition Christian Democrats, who control the Bundesrat, have objected to the move and have called for a wider package of pensions tax breaks.
Their opposition means the bill will now be passed on to a mediation committee which will rework it before passing it back to be scrutinised by both the lower and upper chambers of parliament.
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