Assets : Germany

The total value of the financial assets of private households - including cash, savings, securities and life insurance policies, for example - has tripled since 1980. At the end of 1 994, gross private financial assets in the whole of Germany totaled approximately DM43 trillion, compared to DM 1.5 trillion in western Germany at the end of 1980. Six percent of these financial assets were held by households in the new federal states. Their assets doubled between the end of 1990 and the end of 1994, namely from DM 137 billion to DM 272 billion. The value of privately owned real estate must be added in as well.

In 1993, 50 percent of the private households in the west (compared to 38 percent in the year 1962) and 28 percent of those in the east owned real estate. For the most part this was residential property which they either occupied themselves or rented out. In the course of decades of widespread capital formation activity, private assets have become more evenly distributed. As a consequence of this development, private tangible and financial assets valued at between DM 100 billion and DM 200 billion are bequeathed to heirs each year, more than at any other time in Germany’s history. Since the 1950s the government has promoted private capital formation by means of various bonuses, allowances and tax concessions.

Tax incentives encourage people to save through life insurance policies, the non-income-relafed building allowance promotes acquisition of residential property, and a house-building bonus is paid to people contributing to home ownership savings plans. There are certain yearly limits on the amount of savings qualifying for state support under these various private capital formation schemes, and the house-building bonus is also tied to incomes. In addition to the general incentives for capital formation available to all citizens, employees are eligible for a special savings premium for savings of up to DM 936 per calendar year (provided their taxable income does not exceed a certain limit).

Under the Act Promoting Capital Formation by Employees, these savings must be transferred directly by the employer to the employee’s building and loan association account, a capital formation account with a bank (including investment certificates and shares), or the employer’s capital formation scheme. In the western part of Germany, capital formation savings arrangements are made for most employees - primarily within the scope of collective wage agreements - in addition to their normal wage. Employees can also obtain bonuses for parts of their wages which they save.

In 1994, about 26.5 million employees invested a total of about DM 19 billion under capital formation savings arrangements. Roughly DM 9.5 billion of this amount was paid in by employers. About 11 million employees under the income limit received about DM750 million in savings premiums for roughly DM7.5 billion in capital formation savings for the year 1994. Up to a certain limit, employees also receive tax concessions on amounts which they invest in their company.