Terminating your workplace pension when changing employer: options and consequences for your future
19.04.25
3
Minutes
Katrin Straub
Managing Director at nextsure
A job change often raises questions about occupational pension provision (bAV). Is cancellation possible and sensible, or are there better alternatives for securing your accrued contributions? This article outlines your options.
The topic in brief and concise terms
Cancelling occupational pension provision (bAV) when changing employer is rarely the best option and is often only possible for very small entitlements; alternatives such as transfer or contribution-free status are usually more advantageous.
Employees often have a legal entitlement (§ 4 BetrAVG) to transfer the occupational pension capital to their new employer if certain conditions (implementation method, capital amount, one-year deadline) are met.
An early payout of the occupational pension scheme (bAV) triggers subsequent taxation of the taxes and social security contributions saved, which can significantly reduce the payout amount.
Quick Facts: Ending the occupational pension scheme (bAV) when changing employer – the essentials at a glance
Changing employer presents you with the decision of what should happen to your occupational pension scheme (bAV). Termination is rarely the best solution and is often only possible under certain conditions. In most cases, “termination” actually means paid-up status, in which your accumulated capital is retained. Transferring your bAV to your new employer is often a better option and is regulated by law in § 4 BetrAVG. In doing so, deadlines, such as applying within one year of leaving the job, must be observed.
Options when changing employer: termination, transfer or closure?
If you change jobs, there are several options available for your existing occupational pension scheme. Direct cancellation with immediate payout is usually only possible in the case of so-called small entitlements, if the monthly pension would be below, for example, 37.45 euros (as of 2025). The most common and often most advantageous option is the transfer of the pension capital. Under Section 4 of the BetrAVG, you often have a legal right to transfer the accumulated capital (transfer value) to your new employer, provided certain conditions are met. These include that the occupational pension scheme was run through direct insurance, a pension fund or a pension fund and that the transfer value does not exceed the contribution assessment ceiling (e.g. 96,600 euros in 2025). As a rule, the application must be submitted within one year of the end of the employment relationship. Alternatively, the new employer can take over the old contract, although this requires the consent of all three parties. If a transfer is not desired or not possible, you can make the contract paid-up or continue it privately. However, in the case of private continuation, the tax advantages of salary conversion no longer apply. Termination and payout of the occupational pension scheme is complex and should be carefully considered.
Practical section: What exactly happens to my bAV contract?
The decision about the future of your bAV depends largely on the implementation route and the arrangements of your former and new employer. With a direct insurance policy, pension fund or pension scheme, transferring the capital is often unproblematic if the legal requirements are met. For example: over three years, you paid €200 a month into a direct insurance policy and then change jobs. Your accumulated capital of €7,200 (plus interest, less costs) can be transferred to your new employer's bAV contract if they also offer a corresponding implementation route. The new employer is obliged to provide an equivalent commitment. Note that the new employer is not obliged to grant exactly the same terms or contributions as the former employer. Another option is paid-up status: your contract is put on hold, the capital continues to earn interest, but no new contributions are paid in. This can make sense if the old contract has very good terms that cannot be transferred. Continuing privately is also an option; here, you continue to pay the contributions from your net salary. This is often associated with the loss of tax advantages and employer contributions. A termination of the bAV should be the last option.
Here are the most common scenarios and their practical effects:
Transfer to new employer: The capital moves into the new employer's pension system; often the best solution for continuing retirement provision.
Paid-up status: The contract remains in place; no further contributions are paid; the capital continues to grow through interest.
Private continuation: You continue paying the contributions yourself from your net income; tax advantages are lost.
Termination and payout (only for very small entitlements): The capital is paid out, taxes and social security contributions become due.
You should always clarify the exact steps and deadlines with your former and new employer as well as the relevant insurer.
Expert depth: Legal basics and pitfalls when cancelling occupational pension schemes
The Occupational Pensions Act (BetrAVG) forms the legal basis for handling company pension schemes (bAV) when changing employer. Particularly relevant is Section 4 BetrAVG, which governs the right to transfer (portability). This section grants employees, under certain conditions, the right to transfer their accrued capital to a new provider. Vesting of entitlements is another important aspect. Contributions from salary sacrifice are vested immediately. For employer-financed contributions, waiting periods apply, for example three years’ service and a minimum age of 21 for commitments from 2018 onwards. A common pitfall is underestimating the tax consequences of an early payout. If funds from a bAV are paid out early (e.g. in the case of small entitlements), the taxes and social security contributions saved during the accumulation phase must be taxed retrospectively. This can significantly reduce the amount paid out. Our expert tip: always first check the possibility of taking your bAV with you or transferring it before considering termination. Employer consent is usually required for a standard termination (outside small entitlements), as the employer is often the policyholder.
Important sections and regulations are:
Section 4 BetrAVG: Regulates the transfer of entitlements.
Section 1b BetrAVG: Defines the vesting of entitlements.
Mandatory employer contribution for salary sacrifice (Section 1a (1a) BetrAVG).
The de minimis threshold (small-benefit threshold) for a possible cash settlement.
These regulations protect your entitlements, but also define clear limits for termination and payout.
Alternatives to cancellation: premium-free cover and private continuation as options
Before considering cancelling your occupational pension provision, you should examine the alternatives. Contribution suspension is a commonly used option. In this case, you stop making further contributions, but the capital you have already saved remains in the contract, continues to earn interest and is paid out to you at retirement age. This can make sense if the new employer does not offer a transfer or if the terms of the old contract are particularly good. There are generally no direct costs for the suspension, apart from any administrative fees charged by the insurer. Another option is to continue the contract privately. You then continue paying the contributions out of your net income. The advantage is that the contract continues on its original terms. The disadvantage is the loss of tax and social security savings through salary conversion and the possible loss of the employer contribution. This option is often only worth considering for contracts with very good return prospects or important additional components (e.g. disability insurance). Weigh the pros and cons carefully. If your new employer does not take over the direct insurance policy, these are often the most practical ways.
Tax and social security law aspects in the event of termination and payout
Termination and early payout of a company pension scheme have significant tax and social security consequences. During the savings phase, salary conversion allows you to benefit from tax and social security savings, as contributions are paid from gross salary. If the contract is terminated early and the capital is paid out (e.g. in the case of small vested entitlements), these saved contributions become due retrospectively. The tax office treats the payout as other income, which can lead to a high tax burden. Social security contributions on the payout (health and long-term care insurance) must also be paid. This can result in the amount paid out being significantly lower than the total sum of contributions paid in. Even if the contract is merely made paid-up or continued privately, the tax framework changes. If continued privately, the contributions must be paid from net income that has already been taxed. At retirement age, benefits from the bAV are subject to subsequent taxation. A careful review of your individual situation by an expert is essential in order to avoid financial disadvantages. Consider whether there are ways to optimise health insurance contributions for direct insurance policies.
Changing employer requires proactive action regarding your occupational pension scheme (bAV). First, find out from your former employer the exact terms of your contract and the options available when you leave. Clarify the transfer value and the deadlines. In parallel, speak to your new employer at an early stage about its bAV offering and its willingness to take over your old contract or the capital. Request the necessary documents for a transfer in good time and submit them by the deadline – usually within one year of changing jobs. Compare the terms: is a transfer advantageous, or would a paid-up status for the old contract be more sensible? If in doubt, seek independent advice. Document all agreements in writing. Careful planning secures your retirement provision entitlements and avoids financial losses. Bear in mind that old insurance contracts can sometimes offer favourable terms.
Checklist for changing employer:
Gather information from the former employer (contract details, transfer value, deadlines).
Discussion with the new employer (bAV offering, transfer options).
Review the vested status of your entitlements.
Compare the options: transfer, paid-up status, private continuation, cancellation (only in exceptional cases).
Obtain quotes and advice (e.g. from nextsure).
Submit the application for the chosen option by the deadline.
Obtain written confirmation of all agreements.
Check whether a company pension scheme is still worthwhile for your situation.
These steps help you approach the process in a structured way.
nextsure: Your partner for a secure future
The regulations governing occupational pension provision when changing employers are complex. As a digital insurance portal, our mission at nextsure is to offer you tailored and easy-to-understand insurance solutions. We support you in making the best decision for your situation, whether that is a transfer, suspension or another solution for your occupational pension provision. Our experts analyse your individual situation and show you clear courses of action. Benefit from our expertise in the field of occupational pension provision.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete suggestions for optimisation.
More useful links
Wikipedia provides a comprehensive overview of occupational pension provision (bAV).
The Federal Ministry of Labour and Social Affairs (BMAS) provides detailed information on occupational pension provision.
The German Pension Insurance provides an overview of various options for retirement provision.
The Consumer Advice Centre offers information on occupational pension provision and salary conversion.
Laws on the Internet provides the full legal text of the Occupational Pensions Act (BetrAVG).
The Federal Centre for Political Education (bpb) examines occupational pension provision from a political and social perspective.
The Federal Ministry of Labour and Social Affairs (BMAS) explains salary conversion in the context of occupational pension provision.
Wikipedia provides a comprehensive overview of the Occupational Pensions Act.
Haufe provides information on occupational pension provision when changing employer.
FAQ
What does vesting mean in occupational pension provision?
Vesting means that your entitlements to the bAV also remain in place if you change employer. Your own contributions (salary conversion) are vested immediately. For employer-funded portions, certain waiting periods apply (e.g. three years of service and a minimum age of 21 for commitments from 2018 onwards).
What costs arise if the occupational pension scheme is terminated?
If you cancel and receive a payout (usually only for very small entitlements), the previously saved taxes and social security contributions become due. The insurer’s administration fees may also apply. This can significantly reduce the payout amount.
Can I continue my company pension privately?
Yes, in many cases you can continue your occupational pension scheme contract privately, particularly in arrangements such as a direct insurance policy or pension fund. You then pay the contributions from your net income, which means the tax advantages of salary conversion no longer apply.
What is a contribution waiver in occupational pension provision (bAV)?
With a contribution-free policy, you no longer pay any further contributions into your occupational pension contract. However, the capital you have built up so far remains intact, continues to earn interest and will be paid out to you at retirement age.
What is the de minimis threshold or small entitlement?
A small pension entitlement (also known as the de minimis threshold) refers to a very small pension entitlement from the occupational pension scheme. If your expected monthly pension is below this value (e.g. 37.45 euros in 2025), you can, after the employment relationship has ended, দাবি a one-off severance payment (payout).
Does my new employer have to pay the same contribution to my company pension as my old one?
No, the new employer is not obliged to make exactly the same contributions as your former employer, as long as they grant the statutory minimum contribution of fifteen per cent in the case of salary conversion (for certain implementation routes).
