Evaluate Options and Consequences: Cancelling and Cashing Out Occupational Pension Schemes
30 May 2025
Katrin Straub
Managing Director at nextsure
Are you considering cancelling your occupational pension scheme (bAV) and withdrawing the capital? This step requires careful consideration, as it often poses more disadvantages than benefits. We will show you what you need to know and what smarter options are available for your financial future.
The topic in brief and concise terms
Terminating occupational pension schemes (bAV) is usually not legally provided for and often results in significant financial disadvantages due to back taxes.
Alternatives such as suspending contributions or transferring the occupational pension contract are usually more sensible than cancelling.
The payout of the occupational pension capital usually occurs at retirement age, even if termination would be possible.
The reality of terminating an occupational pension scheme: Often not possible and rarely beneficial
Many employees consider terminating their occupational pension scheme (bAV) to quickly access money. However, the reality is usually different: A formal termination by the employee is generally not provided for by law. The main reason for this is the pension purpose of the bAV; the capital is meant to secure your pension in retirement. An early payout contradicts this fundamental goal and is therefore only conceivable in narrowly defined exceptional cases. The hurdles for a termination are deliberately set high. Bear in mind that the contracting party of the insurer is usually your employer, whose consent would often be required. Even if a termination were theoretically possible, the payout of the capital would in most cases not occur until the regular retirement age. Immediate access to the money is therefore mostly an illusion. This circumstance makes a careful examination of the alternatives essential.
High cost trap: Tax and social security disadvantages upon payout
If, in exceptional cases, there is an early payout of the bAV capital, you should expect significant financial disadvantages. During the accumulation phase, you benefit from tax and social contribution savings because contributions are made from your gross income. In the event of an early payout, these benefits are reversed. You must repay the taxes and social security contributions saved up to that point. In addition, there are often administrative fees from the insurer, which further reduce the payout amount. In the worst-case scenario, these repayments and costs can even exceed the accumulated capital, leading to an actual financial loss. Correct tax treatment is crucial here. You should definitely consider these financial consequences before deciding to pursue the path of termination.
Exception Small Claim: When a settlement is possible
One of the few exceptions where an early payout of your occupational pension scheme (bAV) might be possible is the so-called minimal entitlement. A minimal entitlement is when the expected monthly pension from the bAV does not exceed a certain threshold. For the year 2025, this de minimis limit is approximately 37 euros monthly pension in the former federal states. If your entitlement is below this, you may be able to request a settlement, even without the employer's consent. The specific regulations can be found in the Occupational Pensions Act (§ 3 BetrAVG). The following points are relevant here:
The calculation of the pension amount takes place at the time of the application.
The settlement amount corresponds to the accumulated capital.
Even with a settlement of a minimal entitlement, taxes and social contributions are incurred.
The application must be actively submitted by the employee.
Carefully check whether your bAV falls under this regulation. Even if this is the case, the decision should be well-considered, as here too, retirement provisions are reduced. Assessing whether transferring the bAV might be more sensible remains important.
Useful Alternative 1: The Suspension of Contributions to Your Occupational Pension
If you can no longer pay or do not want to pay the ongoing contributions for your occupational pension scheme, cancelling is rarely the best option. A much more flexible and often more advantageous option is contribution suspension. With this, you stop making contributions, but the capital you have already accumulated remains in the contract and continues to earn interest. Your entitlement to a later, albeit reduced, company pension remains intact. Contribution suspension avoids the disadvantages of cancellation, such as tax repayments. Usually, there are low administrative fees for the conversion. This option gives you financial flexibility without completely giving up your pension plan. You can often resume contributions later. Consider whether this might be a better solution for your situation, rather than recklessly risking the value of old contracts.
Expert Depth: Understanding Legal Fundamentals and Pitfalls
The termination and payout of a company pension scheme (bAV) is a complex field regulated by the Company Pensions Act (BetrAVG). Central to this is § 1b BetrAVG, which governs the vesting of entitlements. This means that your claims remain intact even if you leave the company after a certain period (usually three years of employment and a minimum age of 21). However, as mentioned, termination with immediate payout is only envisaged in exceptional cases such as small entitlements (§ 3 BetrAVG). Our expert tip: Do not underestimate the employer's right to consent. Since the employer is often the policyholder, they can oppose a termination to avoid endangering their commitments from the pension promise. In the case of an employer-financed company pension scheme, the hurdles are even higher. Optimising deductions is more achievable in retirement than through termination. Always seek professional advice in case of doubt to avoid costly mistakes.
Long-term Perspective: Why Occupational Pensions Remain an Important Element
Despite potential financial constraints or changed life plans, the importance of occupational pension schemes should not be underestimated. Alongside the state pension and private provisions, it represents one of the three pillars of retirement provision in Germany. Due to the government subsidies during the saving phase (tax and social security savings) and the often mandatory employer contribution (at least fifteen per cent in salary conversion), it is an attractive pension instrument. Cancelling and cashing out the occupational pension scheme not only leads to financial disadvantages but also reduces your future pension and, consequently, your standard of living in retirement. Think long-term and carefully consider all alternatives. Is an occupational pension scheme fundamentally sensible for your situation? Most often, yes. Before making a final decision, professional advice can help you find the right solution and optimise your retirement planning. The possibility of tax-deductible contributions to the occupational pension scheme is also an important advantage.
Conclusion: Terminate occupational pension schemes only in emergencies – consider alternatives!
Cancelling and cashing out occupational pensions is only a good idea in very rare cases and often not possible at all. The financial disadvantages due to tax repayments and the loss of social security contributions weigh heavily. It is better to consider alternatives such as contribution suspension or transferring the contract in the event of a change of employer. These options at least preserve part of your valuable retirement provision. Making an informed decision requires a thorough analysis of your situation. Weigh the short-term necessity against the long-term implications for your pension. Remember that even small monthly contributions can add up to a substantial additional pension over many years. The early termination of other insurances should also be carefully considered. At nextsure, we are happy to support you in analysing your individual situation and developing the best strategy for your retirement plan.
Request an individual risk analysis now: Have your insurance situation reviewed for free and receive concrete optimisation suggestions.
More useful links
The Federal Ministry of Justice provides the Occupational Pensions Act (BetrAVG) in full text, the central legal basis for occupational pensions.
The Federal Ministry of Labour and Social Affairs (BMAS) offers information on income and assets in the context of social benefits, which can be relevant in evaluating occupational pension payouts.
The Finanzamt.NRW provides detailed information on the tax treatment of benefits from occupational pensions.
The AOK explains the regulations on health insurance contributions on pension benefits, which also include occupational pension benefits.
The Techniker Krankenkasse (TK) offers insights into exemptions and the calculation of contributions in occupational pensions.
The German Pension Insurance provides a comprehensive brochure on occupational pensions, highlighting important aspects and regulations.
The Federal Statistical Office (Destatis) delivers official statistics and press releases that can offer relevant background information on economic and demographic developments.
FAQ
Unter welchen Bedingungen ist eine Kündigung der bAV überhaupt möglich?
Eine Kündigung ist nur in sehr engen Ausnahmefällen möglich, z.B. bei einer sogenannten Kleinstanwartschaft (sehr geringe zu erwartende Rente) oder manchmal mit Zustimmung des Arbeitgebers, wobei die Auszahlung meist trotzdem erst im Rentenalter erfolgt.
Welche steuerlichen Folgen hat die Auszahlung einer bAV?
Bei einer Auszahlung, insbesondere vorzeitig, müssen die während der Ansparphase erhaltenen Steuervorteile zurückgezahlt werden. Das Kapital ist voll steuerpflichtig, und es fallen Sozialabgaben an.
Was bedeutet 'Unverfallbarkeit' bei der bAV?
Unverfallbarkeit bedeutet, dass Ihre Ansprüche aus der bAV auch nach Beendigung des Arbeitsverhältnisses erhalten bleiben, sofern bestimmte Voraussetzungen (z.B. Mindestdauer der Zusage, Mindestalter) erfüllt sind. Dies ist in § 1b BetrAVG geregelt.
Kann mein Arbeitgeber die Kündigung meiner bAV ablehnen?
Ja, da der Arbeitgeber in der Regel der Versicherungsnehmer des bAV-Vertrags ist, ist seine Zustimmung zur Kündigung meist erforderlich. Er kann diese ablehnen, um den Versorgungszweck sicherzustellen.
Wie hoch ist die Bagatellgrenze für Kleinstanwartschaften aktuell?
Die Bagatellgrenze für eine mögliche Abfindung einer Kleinstanwartschaft liegt für das Jahr 2025 bei einer monatlichen Rente von ca. 37 Euro (West). Dieser Wert kann jährlich angepasst werden.
Welche Alternativen gibt es zur Kündigung meiner bAV?
Die gängigsten und meist besseren Alternativen sind die Beitragsfreistellung des Vertrags, die Übertragung auf einen neuen Arbeitgeber oder in manchen Fällen die private Weiterführung.
