Investment & Wealth
Occupational pension scheme
terminate occupational pension upon changing employer
Cancelling Company Pension when Changing Employer: Options and Consequences for Your Future
A job change often raises questions about occupational pension schemes (bAV). Is termination possible and sensible, or are there better alternatives to secure your accrued contributions? This article explores your options.
The topic in brief and concise terms
Terminating an occupational pension scheme (bAV) when changing employers is rarely the best option and is often only possible for very small entitlements; alternatives such as transfer or contribution exemption are usually more advantageous.
Employees often have a legal right (§ 4 BetrAVG) to transfer the occupational pension capital to a new employer if certain conditions (implementation method, capital amount, period of one year) are met.
An early payout of the company pension scheme leads to the subsequent taxation of the saved taxes and social contributions, which can significantly reduce the payout amount.
Quick Facts: Termination of occupational pension with employer change – The essentials in brief
A change of employer 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 certain conditions. In most cases, a 'termination' rather means a contribution exemption, where your accumulated capital is retained. Transferring your bAV to the new employer is often a better option and is regulated by law under § 4 BetrAVG. Deadlines, such as applying within one year after leaving the job, must be observed.
Options when changing employers: Resignation, transfer, or deactivation?
If you change jobs, there are several options available for your existing occupational pension scheme. A direct cancellation with immediate payout is usually only possible for so-called small entitlements, if the monthly pension would be, for example, under 37.45 euros (as of 2025). The most common and often most advantageous option is the transfer of the pension capital. According to § 4 BetrAVG, you often have a legal claim to transfer the accumulated capital (transfer value) to the new employer, provided certain conditions are met. These include that the occupational pension scheme ran via a direct insurance, pension fund, or pension pool and the transfer value does not exceed the contribution assessment limit (e.g. 96,600 euros in 2025). The application must generally 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 consent of all three parties. If a transfer is not desired or possible, you can make the contract non-contributory or continue privately. However, with private continuation, the tax advantages of converting salary are eliminated. A cancellation and payout of the occupational pension scheme is complex and should be considered carefully.
Practical Part: What exactly happens with my occupational pension contract?
The decision about the future of your occupational pension scheme (bAV) largely depends on the implementation method and the regulations of your previous and new employers. With a direct insurance, pension scheme, or pension fund, transferring the capital is often straightforward if the legal requirements are met. For example, you have paid 200 euros monthly into a direct insurance scheme for over three years and then change jobs. Your accumulated capital of 7,200 euros (plus interest, less costs) can be transferred to the bAV contract of your new employer if they also offer a corresponding implementation method. The new employer is obliged to provide an equivalent promise of benefits. Note that the new employer is not required to offer the exact same conditions or contributions as the old employer. Another option is to suspend contributions: your contract remains, the capital continues to accrue interest, but no new contributions are made. This can be sensible if the old contract has very advantageous conditions that are not transferrable. Continuing privately is also an option, where you pay the contributions out of your net salary. This is often associated with the loss of tax advantages and employer contributions. Termination of the bAV should be the last resort.
Here are the most common scenarios and their practical implications:
Transfer to a new employer: The capital moves into the new employer’s pension scheme; often the best solution for continuing retirement provision.
Contribution suspension: The contract remains in place, but no further contributions are paid; the capital continues to grow through interest.
Continue privately: You continue to pay the contributions out of your net income; tax benefits are lost.
Termination and payout (only in cases of small entitlements): The capital is paid out, taxes and social security contributions are due.
You should always clarify the exact steps and deadlines with both your old and new employer, as well as the respective insurer.
Expert Depth: Legal Basics and Pitfalls in Terminating Occupational Pension Schemes
The Occupational Pensions Act (BetrAVG) forms the legal foundation for handling occupational pensions when changing employers. Particularly relevant is § 4 BetrAVG, which governs the right to transfer (portability). This paragraph ensures that employees, under certain conditions, have the right 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-funded contributions, certain conditions apply, such as three years of service and a minimum age of 21 for commitments from 2018 onwards. A common pitfall is underestimating the tax implications of an early payout. If funds from an occupational pension are paid out early (e.g., for minor entitlements), the taxes and social security contributions saved during the accumulation phase must be repaid. This can significantly reduce the payout amount. Our expert tip: Always first explore the possibility of taking your occupational pension with you or transferring it before considering termination. Employer consent is usually required for a regular termination (except for minor entitlements), as the employer is often the policyholder.
Important paragraphs and regulations include:
§ 4 BetrAVG: Governs the transfer of entitlements.
§ 1b BetrAVG: Defines the non-forfeitability of entitlements.
Mandatory employer contribution in case of salary conversion (§ 1a para. 1a BetrAVG).
The threshold for minor entitlements for a possible settlement.
These regulations protect your rights, but also define clear limits for termination and payout.
Tax and social security aspects in the event of termination and payout
The termination and early payout of an occupational pension scheme have significant tax and social security implications. During the accumulation phase, you benefit from tax and social security contributions savings through salary conversion, as the contributions are deducted from your gross salary. If the contract is terminated early and the capital is paid out (e.g., for small entitlements), these saved contributions become payable retroactively. The tax office treats the payout as other income, which can result in a high tax burden. Additionally, social security contributions on the payout (health and long-term care insurance) must be paid. This can result in the paid-out amount being significantly lower than the sum of the contributions made. Even if the policy is just suspended or continued privately, the tax conditions change. With private continuation, contributions must be made from already-taxed net income. In retirement, 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 ways to optimize health insurance contributions with direct insurance.
Recommendations: How to proceed when changing employers
Changing employers requires proactive management of your occupational pension scheme (bAV). First, gather information from your former employer about the specific terms of your contract and the options available upon departure. Clarify the transfer value and deadlines. At the same time, engage in early discussions with your new employer regarding their bAV offering and their willingness to take over your previous contract or capital. Request the necessary documents for a transfer in a timely manner and submit them within the deadline – usually within a year of changing jobs. Compare the conditions: Is a transfer advantageous, or would it be more beneficial to halt contributions to the old contract? Seek independent advice if in doubt. Document all agreements in writing. Careful planning secures your pension entitlements and prevents financial losses. Remember that old insurance contracts can sometimes offer favourable terms.
Checklist for changing employers:
Information gathering from the previous employer (contract details, transfer value, deadlines).
Discussion with the new employer (bAV offering, takeover possibilities).
Examination of the vesting of your entitlements.
Comparison of options: transfer, halting contributions, private continuation, termination (only in exceptional cases).
Obtaining offers and advice (e.g. through nextsure).
Timely application for the chosen option.
Obtain written confirmation of all agreements.
Examine whether an occupational pension scheme remains beneficial for your situation.
These steps will help you approach the process in a structured way.
nextsure: Your partner for a secure future
The regulations for company pension schemes when changing employers are complex. As a digital insurance portal, it is our mission at nextsure to offer you tailored and easily understandable insurance solutions. We support you in making the best decision for your situation, whether that's transferring, deactivating, or finding another solution for your company pension scheme. Our experts analyse your individual situation and provide you with clear courses of action. Benefit from our expertise in the field of company pension schemes.
Request an individual risk analysis now: Have your insurance situation reviewed for free and receive concrete optimisation suggestions.
More useful links
Wikipedia provides a comprehensive overview of occupational pensions (bAV).
The Federal Ministry of Labour and Social Affairs (BMAS) offers detailed information about occupational pensions.
The German Pension Insurance provides an overview of various pension options.
The Consumer Advice Centre offers information on occupational pensions and salary conversion.
Gesetze im Internet supplies the full text of the Occupational Pensions Act (BetrAVG).
The Federal Agency for Civic Education (bpb) examines occupational pensions from a political and societal perspective.
The Federal Ministry of Labour and Social Affairs (BMAS) explains salary conversion within the framework of occupational pensions.
Wikipedia provides a comprehensive overview of the Occupational Pensions Act.
Haufe provides information on occupational pensions in the event of an employer change.
FAQ
What does vesting mean in occupational pension schemes?
Vesting means that your claims to the occupational pension scheme (bAV) remain intact even if you change employers. Your own contributions (salary conversion) are vested immediately. Employer-financed shares are subject to certain conditions, such as three years of employment and a minimum age of 21 for commitments made from 2018 onwards.
What costs incur upon cancellation of the occupational pension scheme?
On cancellation with payout (usually only for minor entitlements), previously saved taxes and social security contributions become due. There may also be administrative fees from the insurer, which can significantly reduce the payout amount.
Can I continue my occupational pension scheme privately?
Yes, in many cases, you can continue your bAV contract privately, especially with methods like direct insurance or pension funds. You will then pay the contributions from your net income, which means the tax benefits from salary conversion will no longer apply.
What is a contribution waiver of the bAV?
With a contribution waiver, you do not pay any further contributions into your bAV contract. However, the accumulated capital remains intact, continues to earn interest, and will be paid out to you upon retirement.
What is the de minimis limit or minor entitlement?
The minor entitlement (also known as the de minimis limit) refers to a very low pension claim from the bAV. If your expected monthly pension is below this threshold (e.g., €37.45 in 2025), you can request a one-off severance payment (payout) after the end of the employment relationship.
Does my new employer have to pay the same contribution to the bAV as my old one?
No, the new employer is not obliged to provide exactly the same contributions as your old employer, as long as they grant the statutory minimum contribution of fifteen percent for salary conversion (for certain implementation methods).
