Occupational pension provision for entrepreneurs: strategies for a secure future
09.06.25
6
Minutes
Katrin Straub
Managing Director at nextsure
Occupational pension provision is an important tool for entrepreneurs to secure their own future. However, many managing directors underestimate its complexity and the long-term commitments involved. Find out how to develop the right strategy and make the most of tax advantages.
The topic in brief and concise terms
Entrepreneurs have a powerful tool in the company pension scheme for their own retirement provision, but must observe specific rules for managing shareholder-directors. [__6__2]
Choosing the right implementation route (e.g. direct insurance, support fund) is crucial and depends on individual objectives and the company’s situation. [__1__1,__6__2]
Tax advantages are significant, but they require proper structuring to avoid pitfalls such as hidden profit distributions. [__7__2,__7__3]
Understanding the basics of occupational pension provision for entrepreneurs
Occupational pension provision (bAV) is more than just an additional benefit for entrepreneurs. It is a strategic tool for your own financial security and can increase the attractiveness of your company. Around 37 per cent of employees choose a company because of a bAV. [__2__2] Special rules apply to shareholder-managing directors (GGF), as they are often not subject to social insurance contributions. [__6__2] Careful planning is therefore essential in order to close pension gaps in old age. The bAV is part of the three-pillar model of retirement provision in Germany. [__2__2] Choosing the right implementation route is crucial to success. Find out more about the 3 layers of retirement provision.
The five routes for occupational pension provision at a glance
Entrepreneurs have five implementation routes available for the company pension scheme (bAV). [__3__5] Each route has specific advantages and disadvantages that need to be weighed up. Direct insurance is a classic route in which the company concludes a contract with an insurer. [__1__1] Contributions are tax-free up to eight per cent of the contribution assessment ceiling. [__5__1] The Pensionskasse and the Pensionsfonds are legally independent pension institutions. [__2__5] The supporting fund often offers greater flexibility in contribution levels and is attractive for well-paid managing shareholder-directors (GGF), as contributions are often tax-free without limit. [__6__2,__1__1] A direct commitment (pension commitment) means that the company itself provides the pension benefit and sets aside provisions for it. [__2__5] This variety makes it possible to tailor company pension provision to individual needs.
The most common implementation routes for shareholder-managing directors are:
Direct insurance: Simple and flexible, well suited to smaller contributions. [__1__1]
Supporting fund: High flexibility, unlimited tax-free contributions possible. [__6__2,__1__1]
Pension commitment (direct commitment): Direct obligation of the company, often for higher pension targets. [__2__5]
Pension fund: Often offers more growth-oriented capital investments. [__3__5]
Pensionskasse: External, regulated pension institution. [__2__5]
The choice depends heavily on the entrepreneur’s individual situation and objectives.
Maximising tax advantages and pitfalls for entrepreneurs
The bAV offers significant tax advantages for entrepreneurs and their companies. Contributions to the bAV can often be deducted as business expenses, thereby reducing the company’s tax burden. [__7__2] For employees (and thus also for employed managing directors), contributions of up to eight per cent of the assessment ceiling for statutory pension insurance are tax-free. [__7__2] In 2024, this amounts to up to EUR 7,248. Please note the exact contribution assessment ceilings, which may change annually. [__2__4] When benefits are paid out at retirement, they are then subject to tax, often at a lower personal tax rate. [__3__4] One pitfall can be the so-called hidden profit distribution (vGA), if commitments to managing directors are not structured appropriately or at arm’s length. Find out more about how you can claim tax relief for your bAV.
Practical examples and design tips for the company pension scheme for entrepreneurs
A 45-year-old shareholder-director with an annual salary of EUR 120,000 would like to close his pension gap. A combination of direct insurance to make full use of the tax-free maximum amounts and a support fund for contributions above this can be a sensible option. [__6__2,__1__1] Our expert tip: Have the appropriateness of the pension reviewed regularly. The affordability and vesting of the commitment are important criteria for tax recognition. [__7__3] For a direct pension commitment, for example, clear rules on affordability and waiting periods must be established. [__7__3] Careful documentation of all resolutions is essential, especially for controlling shareholder-directors. [__10__5] Consider whether pension insurance for the self-employed could be a useful addition.
Important structuring tips include:
Start early: The earlier you begin, the lower the monthly outlay needed for a substantial capital sum.
Regular review: Check your bAV every three to five years and adapt it to changing life circumstances.
Risk cover: Remember to provide cover for occupational disability and survivor benefits. [__5__1]
Professional advice: Seek independent advice to find the best solution for your specific situation.
These points help create a solid foundation for your retirement provision.
Know the risks and liability pitfalls of occupational pension provision for entrepreneurs
Pension commitments can become a significant financial burden for companies if the provisions set aside are not sufficient. [__9__1] More than two thirds of pension commitments in Germany are not sufficiently funded. [__9__1] This can weaken the company's liquidity and creditworthiness. [__9__1] Another risk is longevity: if the beneficiaries live longer than expected, benefits must also be paid for longer. Faulty or unclear commitments can lead to additional tax payments. [__9__4] In the event of a company sale, existing pension obligations can reduce the value or make the sale more difficult. [__8__3] A careful review and, where appropriate, outsourcing of pension obligations can be advisable. [__9__4] The question Is occupational pension provision worthwhile? must therefore always be answered on an individual basis.
Current case law and its impact on business owners
Case law on occupational pension schemes is constantly evolving. The Federal Labour Court (BAG), for example, has clarified that employers are generally not obliged to provide comprehensive information about all the details of occupational pension schemes. [__4__1] Nevertheless, careful drafting of pension commitments is essential. A judgment dated 18 February 2020 (3 AZR 206/18) dealt with the duty to inform in the context of salary conversion. [__4__1] Our expert tip: Keep up to date with current judgments to minimise risks. The Lower Saxony Regional Labour Court ruled on 20 April 2023 (3 Sa 86/22 B) on the entitlement to the provision of an occupational pension scheme on the basis of collective agreement reference clauses. [__4__2] These judgments show the complexity and the need for expert advice. The importance of occupational pension provision is often redefined by such judgments.
The support fund is a popular implementation vehicle for shareholder-managing directors, as it enables high pension benefits. [__12__3] Contributions are often deductible as business expenses without limit. [__11__5] There are two main forms: the flat-rate funded and the reinsured support fund. [__11__1] In the reinsured variant, the support fund takes out an insurance policy to finance the promised benefits. [__11__1] This offers a high level of security, even in the event of the company’s insolvency, as the claims are protected through the Pension Protection Association (PSVaG). [__11__5] Flexibility in the contribution amount is a key advantage. [__11__1] Administrative costs are generally low and are also tax-deductible. [__11__4] For comprehensive retirement provision, a Rürup pension can also be considered.
Use direct insurance as a building block in shareholder-managing director provision
Direct insurance is often the entry point into occupational pensions for shareholder-managing directors. [__1__1] It is relatively easy to administer and neutral on the balance sheet. [__12__3] Contributions of up to eight per cent of the contribution assessment ceiling (in 2021, this was EUR 6,816 per year) can receive tax advantages. [__1__1] Direct insurance can also be continued privately after leaving the company. [__12__3] It is well suited to securing basic needs or as a supplement to other implementation routes. For higher retirement provision targets, direct insurance alone is often not enough. [__13__5] A combination with a support fund or direct pension commitment is often sensible in order to ensure adequate retirement provision for shareholder-managing directors. [__13__5] Also consider possible disability insurance for self-employed people.
Advantages of direct insurance for shareholder-managing directors:
Simple setup and administration. [__1__1]
Tax advantages for contributions up to certain limits. [__1__1]
Neutral impact on the company’s balance sheet. [__12__3]
Option to continue privately. [__12__3]
Option for survivors’ and disability cover. [__1__1]
These aspects make direct insurance a solid foundation.
Conclusion and your next step towards an optimised entrepreneur pension scheme
Occupational pension provision is a powerful tool for business owners to secure their own financial future. The complexity of the various implementation routes and tax regulations requires careful planning and individual adaptation. A well-structured company pension scheme can not only significantly improve retirement benefits, but also optimise the tax burden and help retain employees. The key to success lies in expert advice and a strategy tailored to your needs. Use the expertise of professionals to avoid pitfalls and unlock the full potential of your company pension scheme. Remember that private pension contributions can also complement your provision. We at nextsure are happy to support you in finding the optimal solution for your occupational pension provision as a business owner. Request an individual risk analysis now: have your insurance situation reviewed free of charge and receive concrete optimisation suggestions.
More useful links
Wikipedia offers a comprehensive overview of occupational pensions.
The Federal Statistical Office (Destatis) provides a press release on occupational pensions.
The Federal Statistical Office (Destatis) offers an article on retirement provision.
The Working Group for Occupational Pensions (aba) provides information on labour cost surveys and expenses in the context of occupational pensions.
Statista offers a topic page on occupational pensions with relevant statistics.
Wikipedia explains the concept of salary sacrifice.
Wikipedia offers detailed information on the Occupational Pensions Act.
Wikipedia provides information on the Retirement Savings Act.
The Working Group for Occupational Pensions (aba) provides an overview of current statistics on occupational pensions.
WTW (Willis Towers Watson) provides a report on the impact of demographic change on occupational pensions.
FAQ
Is a company pension scheme mandatory for me as an entrepreneur?
If you have employees, you are obliged to offer them a bAV under salary sacrifice. [__2__2] For your own provision as an entrepreneur (e.g. managing partner), it is not mandatory per se, but it is highly recommended to close pension gaps. [__6__2]
What role does my company type play in the company pension scheme (bAV)?
The legal form of the company is very important. As a shareholder-director of a GmbH, you have different options and tax framework conditions than, for example, a sole trader or freelance professional. [__6__2]
What happens to my company pension scheme if I sell my company?
This depends on the implementation route. Pension commitments can reduce the company value and must be assumed by the buyer. [__8__3] Direct insurance policies are often easier to transfer or can be continued privately. [__12__3]
Can I, as a business owner, set up an occupational pension scheme for myself even if I don’t have any employees?
As a shareholder-director of a limited company (e.g. a GmbH), you can set up an occupational pension scheme (bAV) for yourself. For sole traders without employees, the options for a traditional bAV are limited; here, private retirement solutions such as the Rürup pension are often more suitable. [__5__1,__6__2]
How high should my contributions to the occupational pension scheme be as an entrepreneur?
The contribution amount is highly individual and depends on your retirement provision goal, your financial situation and the tax framework conditions. A precise analysis of your pension gap is the first step. Often, up to ten to fifteen per cent of gross income is recommended.
Which types of cover (e.g. disability insurance) can I integrate into my company pension scheme?
Many implementation routes for occupational pension provision (bAV), such as direct insurance or a support fund, allow the integration of disability insurance or survivors’ cover. This is particularly important for business owners. [__5__1]
