Terminating occupational pension schemes upon changing employers: Options and consequences for your future
19 Apr 2025
6
Minutes
Katrin Straub
CEO at nextsure
A job change often raises questions about occupational pension schemes (bAV). Is termination possible and advisable, or are there better alternatives to secure your accumulated contributions? This article explores your options.
The topic in brief and concise terms
Cancelling occupational pension schemes (bAV) when changing employer is rarely the best option and is often only possible for very small entitlements; alternatives such as transfer or premium waiver are usually more advantageous.
Employees often have a legal entitlement (§ 4 BetrAVG) to transfer their occupational pension capital to a new employer if certain conditions (implementation method, amount of capital, period of one year) are met.
An early payout of the occupational pension scheme leads to the subsequent taxation of saved taxes and social contributions, which can significantly reduce the payout amount.
Quick Facts: Termination of Occupational Pension Scheme upon Employer Change – Key Points at a Glance
Changing employers presents you with the decision of what should happen to your company pension scheme (bAV). Termination is rarely the best solution and is often only possible under specific conditions. Usually, a 'termination' means a contribution exemption, where your accumulated capital is preserved. Transferring your bAV to the new employer is often a better option and is governed by § 4 BetrAVG. In this case, deadlines, such as applying within one year after leaving the job, must be observed.
Options when changing employers: resignation, transfer or deactivation?
When changing jobs, several options are available for your existing occupational pension scheme. A direct termination with immediate payout is usually only possible for so-called small entitlements, if the monthly pension would, for example, be less than €37.45 (as of 2025). The most common and often most advantageous option is the transfer of the pension capital. In accordance with § 4 BetrAVG, you often have a legal entitlement to transfer the accumulated capital (transfer value) to the new employer, provided certain conditions are met. These include the fact that the occupational pension scheme was provided through a direct insurance, pension fund or a pension plan, and the transfer value does not exceed the contribution assessment limit (e.g., €96,600 in 2025). The application usually has to be submitted within one year after the termination of the employment relationship. Alternatively, the new employer can take over the old contract, which requires the agreement of all three parties involved. If a transfer is not desired or possible, you can make the contract non-contributory or continue it privately. However, with a private continuation, the tax advantages of salary conversion are lost. A termination and payout of the occupational pension scheme is complex and should be carefully considered.
Practical Section: What exactly happens with my occupational pension contract?
The decision about the future of your company pension scheme (bAV) largely depends on the implementation method and the regulations of your old and new employer. With a direct insurance, pension fund, or a pension scheme, transferring the capital is often uncomplicated if the legal requirements are met. For example: You have paid 200 euros monthly into a direct insurance for over three years and change jobs. Your accumulated capital of 7,200 euros (plus interest, minus costs) can be transferred to the bAV contract of your new employer if they offer a similar implementation method. The new employer is obliged to provide a value-equivalent commitment. Please note that the new employer is not obliged to offer exactly the same conditions or subsidies as the old employer. Another option is to suspend contributions: Your contract remains in place, the capital continues to earn interest, but no new contributions are made. This can be sensible if the old contract has very good conditions that are non-transferable. Continuing privately is also an option, where you continue paying the contributions from your net salary. This is often associated with the loss of tax benefits and employer subsidies. A termination of the bAV should be the last option.
Here are the most common scenarios and their practical impacts:
Transfer to new employer: The capital moves into the new employer's pension scheme; often the best solution for continuing with retirement provision.
Suspension of contributions: The contract remains, no more contributions are paid; the capital continues to grow through interest.
Private continuation: You continue paying the contributions yourself from your net income; tax benefits are lost.
Termination and payout (only for minor entitlements): The capital is paid out, taxes and social charges become due.
You should always clarify the exact steps and deadlines with your old and new employers and the respective insurer.
Expert Depth: Legal Foundations and Pitfalls in Pension Scheme Termination
The Occupational Pensions Act (BetrAVG) forms the legal basis for handling occupational pension schemes when changing employers. Particularly relevant is § 4 BetrAVG, which governs the right to transfer (portability). This paragraph ensures that employees have the right, under certain conditions, to transfer their accumulated capital to a new pension provider. The non-forfeitability of entitlements is another important aspect. Contributions from salary conversion are immediately non-forfeitable. For employer-financed contributions, conditions apply, such as three years of service and a minimum age of 21 years for commitments from 2018. A common pitfall is underestimating the tax implications of an early withdrawal. If funds from an occupational pension scheme are paid out early (e.g. in cases of very small entitlements), the taxes and social security contributions saved during the savings phase must be repaid. This can significantly reduce the amount paid out. Our expert tip: Always first check the possibility of taking the occupational pension scheme with you or a transfer before considering termination. The employer's consent is usually required for a regular termination (outside of very small entitlements), as the employer is often the policyholder.
Important paragraphs and regulations are:
§ 4 BetrAVG: Governs the transfer of entitlements.
§ 1b BetrAVG: Defines the non-forfeitability of entitlements.
Mandatory employer contribution for salary conversion (§ 1a Abs. 1a BetrAVG).
The de minimis limit for a possible compensation.
These regulations protect your entitlements but also define clear boundaries for termination and payout.
Alternatives to Cancellation: Contribution Exemption and Private Continuation as Options
Before considering the termination of your occupational pension scheme, you should explore the alternatives. Contribution suspension is a frequently used option. In this case, you stop further payments, but your previously accumulated capital remains in the contract, continues to earn interest, and is paid out to you upon retirement. This can be beneficial if the new employer does not offer a takeover or if the conditions of the old contract are particularly favorable. Typically, there are no direct costs for the suspension, except for potential administrative fees from the insurer. Another option is the private continuation of the contract. You then continue to pay the contributions from your net income. The advantage is that the contract continues with its original conditions. The disadvantage is the loss of tax and social security savings due to salary conversion and the potential loss of the employer's subsidy. This option is often worth considering only for contracts with very good return prospects or important additional components (e.g., disability insurance). Carefully weigh the advantages and disadvantages. If your new employer does not take over the direct insurance, these are often the most viable paths.
Tax and social security aspects in case of termination and payout
The termination and early payout of a company pension scheme have significant tax and social security implications. During the accumulation phase, you benefit from tax and social security savings through salary conversion, as contributions are deducted from the gross salary. If the contract is terminated early and the capital is paid out (e.g., in the case of small entitlements), these previously saved charges 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 paid-out amount being significantly lower than the total sum of contributions made. Even if the contract is merely made contribution-free or is continued privately, the tax conditions change. With private continuation, the contributions must be paid from already taxed net income. In retirement, the benefits from the occupational pension scheme are subject to deferred taxation. A thorough examination of your individual situation by an expert is essential to avoid financial disadvantages. Consider whether there are opportunities to optimize health insurance contributions on direct insurance.
Recommendations: Here's how to proceed when changing employers
Changing employers requires proactive action regarding your occupational pension scheme (bAV). First, check with your previous employer about the exact terms of your contract and the options upon leaving. Clarify the amount of the transfer value and the deadlines. At the same time, speak early with your new employer about their bAV offer and willingness to take over your old contract or capital. Request the necessary documents for a transfer in plenty of time and submit them by the deadline—usually within a year of changing jobs. Compare the conditions: Is a transfer beneficial, or is it more sensible to make your old contract paid-up? Seek independent advice if in doubt. Document all agreements in writing. Careful planning secures your pension entitlements and avoids financial losses. Remember, old insurance contracts can sometimes have advantageous terms.
Checklist for changing employers:
Gather information from the old employer (contract details, transfer value, deadlines).
Discussion with the new employer (bAV offer, transfer opportunities).
Check the non-forfeitability of your benefits.
Compare options: transfer, making paid-up, private continuation, termination (only in exceptional cases).
Obtain offers and advice (e.g., from nextsure).
Submit application for the chosen option on time.
Obtain written confirmation of all agreements.
Review whether occupational pension provision remains sensible for your situation.
These steps help you approach the process in a structured way.
nextsure: Your partner for a secure future
More useful links
Wikipedia offers a comprehensive overview of occupational pensions (bAV).
The Federal Ministry of Labour and Social Affairs (BMAS) provides detailed information about occupational pensions.
The German Pension Insurance gives an overview of different pension options.
The Consumer Advice Centre offers information on occupational pensions and salary conversion.
Laws on the Internet provides the full text of the Occupational Pensions Act (BetrAVG).
The Federal Agency for Civic Education (bpb) examines occupational pensions from a political and social perspective.
The Federal Ministry of Labour and Social Affairs (BMAS) explains salary conversion within the framework of occupational pensions.
Wikipedia offers a comprehensive overview of the Occupational Pensions Act.
Haufe provides information on occupational pensions when changing employers.
FAQ
What does vesting mean in occupational pension schemes?
Vesting means that your entitlements to the occupational pension scheme remain intact even if you change employers. Your own contributions (salary conversion) are immediately vested. Certain deadlines apply to employer-financed shares (e.g., three years of service and a minimum age of 21 for commitments made from 2018 onwards).
What costs are incurred when cancelling the occupational pension scheme?
In the event of termination with payment (usually only for very small entitlements), previously saved taxes and social contributions become due. Administrative fees from the insurer 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, especially with implementation routes such as direct insurance or pension funds. You then pay the contributions from your net income, which means the tax advantages of salary conversion no longer apply.
What is a contribution exemption in occupational pension schemes?
When you opt for contribution exemption, you stop making additional contributions to your occupational pension scheme contract. However, the capital already accumulated remains intact, continues to accrue interest, and will be paid out to you upon retirement.
What is the de minimis threshold or small entitlement?
The minimum vesting threshold (also known as the de minimis limit) refers to a very low pension entitlement from occupational pension schemes. If your expected monthly pension is below this value (e.g., €37.45 in 2025), you can request a one-time severance payment (payout) upon termination of employment.
Does my new employer have to pay the same contribution to the company pension scheme as my old one?
No, the new employer is not obliged to provide the exact same contributions as your old employer, as long as they grant the statutory minimum contribution of fifteen per cent for salary conversion (for certain implementation methods).
