Investment & Wealth
Occupational pension scheme
Take your occupational pension with you
Taking your company pension with you: How to secure your additional pension when changing jobs
A change of job often raises questions about occupational pension schemes (bAV). Many employees are uncertain whether they can transfer their occupational pension and what steps are necessary to do so. This article provides you with well-founded and practical guidance on how to successfully transfer your occupational pension.
The topic in brief and concise terms
When changing employers, you can usually take your company pension scheme (bAV) with you; entitlements from deferred compensation are immediately non-forfeitable.
There are various options: Retaining the existing contract, transferring the capital, or suspending contributions/private continuation.
Pay attention to deadlines (usually one year for application), potential costs, and the tax aspects of the transfer.
Understanding the Basics: The Portability Options of Your Occupational Pension Scheme
When changing employers, the question arises: What happens to my occupational pension scheme? The good news is that your accumulated contributions are usually not lost. You have various options for taking your occupational pension scheme with you. The specific options depend on the implementation method of your occupational pension scheme and the timing of the contract conclusion. For contracts concluded after 2004, there is often a legal entitlement to portability, especially with direct insurance, pension funds, or pension schemes. The transfer usually needs to be requested within a year of changing jobs. It is important to clarify the details early to avoid financial disadvantages.
The so-called portability, i.e., the ability to take the occupational pension scheme with you, is regulated in the Company Pensions Act (BetrAVG), particularly in Paragraph four. This law establishes the basis for employees not losing their acquired rights. Many employees do not know that they may have a legal right to portability with direct insurance, pension funds, or pension schemes. The vesting of your rights plays a central role here; more on this in the next section.
Check vested rights: Your secured occupational pension entitlements
A central concept in the context of taking your company pension with you is non-forfeitability. Non-forfeitable means that your entitlements to the promised company pension remain with you even if you change employers. Immediate non-forfeitability applies to entitlements from salary conversion, i.e., contributions you have made from your gross salary. This means these entitlements are secure from day one. The statutory employer contribution is also immediately non-forfeitable.
Certain deadlines apply to purely employer-financed commitments. According to current regulations (since 1 January 2018), an employer-financed occupational pension scheme is non-forfeitable if the employee is at least 21 years old upon leaving and the commitment has existed for at least three years. For older commitments, different, longer deadlines may apply. Therefore, check carefully how long your commitment has existed and what form of financing is involved to correctly assess non-forfeitability. Knowing your non-forfeitable entitlements is the basis for the next steps in taking your company pension with you.
Practical Guide: How to Successfully Include Your Corporate Pension Scheme
Once you have clarified your vested entitlements, it's time to practically implement transferring your occupational pension scheme. There are essentially three ways to carry your occupational pension scheme with you. The first option is for the new employer to take over and continue your existing contract unchanged. This is the simplest option, but it requires the new employer's consent, as they are not obliged to do so.
The second option is the transfer of pension capital (coverage capital transfer) to the pension provider of the new employer. Your accrued capital will be transferred to a new contract with the provider of the new employer. It should be noted that the transfer value must not exceed the contribution assessment ceiling of the statutory pension insurance (in 2023 West 87,600 euros). The third option is to make the old contract non-contributory and continue it privately or let it rest. This can be sensible if a transfer is not possible or disadvantageous. Our expert tip: Clarify early with your new employer which option they offer and compare the terms carefully. Be aware that fees may apply for the transfer.
The following steps are typically to be considered with the transfer:
Inform your former employer about the change and inquire about the current status of your occupational pension (transfer value).
Discuss with your new employer the possibility of continuation or transfer of your occupational pension, ideally before contract signing.
Submit the transfer application in a timely manner (usually within twelve months after changing jobs).
Check the new provider's contract documents carefully, particularly concerning costs and guaranteed interest rates.
Seek independent advice if needed, to make the best decision for you.
The transfer of the occupational pension scheme when changing employer therefore requires some initiative, but it secures your valuable pension entitlements.
Costs and Taxes in View: Financial Aspects of Transferring Occupational Pension Schemes
Transferring your occupational pension scheme can entail costs. For example, transferring the cover capital may involve additional acquisition and distribution costs, which can reduce your yield. Although some providers have agreed on cost-neutral transfers under transfer agreements, this is not always the case. Therefore, explicitly ask about all fees before agreeing to a transfer. It is important that the transfer value does not exceed the contribution assessment ceiling to avoid tax disadvantages (currently around €90,600 in the year 2024).
Tax-wise, the savings phase of the occupational pension scheme is usually advantageous because contributions are paid from the gross salary, thereby saving taxes and social security contributions. Upon payout in retirement, the benefits will be taxed. If you transfer your occupational pension scheme, this principle usually remains. Termination and payout of the capital during the savings phase are often disadvantageous because the saved taxes and social security contributions have to be re-taxed and often high fees arise. Therefore, a careful examination of the financial consequences is essential.
Secure your supplementary pension: nextsure is here to assist you
Company pension schemes are an important component for your financial security in retirement. The ability to take your company pension scheme with you ensures that the benefits you have accrued remain intact even if you change employers. This does require some initiative and careful consideration, but the effort is worthwhile to optimise your additional pension. Remember, a sensible company pension scheme should be planned long-term.
At nextsure, we understand that the details of transferring a company pension can be complex. As your partner for digital insurance solutions, we help you gain clarity and make the right decisions for your retirement provisions. Use our expertise to optimise your company pension scheme.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific optimisation suggestions.
More useful links
Bundesministerium für Arbeit und Soziales (BMAS) offers comprehensive information on occupational pension schemes.
Ihre Vorsorge provides detailed information about occupational pension schemes in the context of a job change.
Deutscher Bundestag provides a PDF document with relevant information on occupational pension schemes.
Deutsche Rentenversicherung offers a brochure on occupational pension schemes.
Gesamtverband der Deutschen Versicherungswirtschaft (GDV) explains how occupational pension schemes can be continued after changing employers.
Arbeitsgemeinschaft für betriebliche Altersversorgung (aba-online) offers a definition of the term “transfer” in the context of occupational pensions.
Verbraucherzentrale provides a guide on occupational pension schemes.
Gesetze im Internet (Bundesministerium der Justiz) provides the full text of Section 4 of the Occupational Pensions Act.
FAQ
What legal basis governs the portability of occupational pensions?
The portability of occupational pensions is mainly regulated in paragraph four of the Occupational Pensions Act (BetrAVG).
What does non-forfeitability mean in the context of occupational pensions?
Non-forfeitability means that your claims to the occupational pension remain valid even if you leave the company before retirement. Contributions from salary conversion are immediately non-forfeitable.
Is my new employer required to take over my old occupational pension contract?
No, your new employer is not obligated to adopt your old contract unchanged. However, they must offer you a form of occupational pension and can transfer the capital into their system if the conditions are met.
What is a capital transfer?
A capital transfer involves moving the accumulated capital from your occupational pension contract to a new contract with the new employer's pension provider.
Can I continue my occupational pension privately?
Yes, depending on the method of execution, you can continue your occupational pension contract privately with your own contributions from net salary, or you can set it to paid-up status if a transfer is not desired or possible.
What deadlines apply for the non-forfeitability of employer-financed occupational pension shares?
Since 1 January 2018, the employer-financed occupational pension is non-forfeitable if the employee is at least 21 years old upon leaving and the promise has been in place for at least three years.
