Occupational pension schemes for entrepreneurs: Strategies for a secure future
9 Jun 2025
8
Minutes
Katrin Straub
CEO at nextsure
Occupational pensions are an important tool for entrepreneurs to secure their own future. However, many managing directors underestimate the complexity and long-term commitments involved. Learn 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 for their own retirement provision with the company pension scheme but must pay attention to specific regulations for managing directors. [__6__2]
Choosing the right implementation path (e.g., direct insurance, support fund) is crucial and depends on individual goals and the company's situation. [__1__1,__6__2]
Tax advantages are significant but require proper structuring to avoid pitfalls such as hidden profit distributions. [__7__2,__7__3]
Understanding the Basics of Occupational Pensions for Entrepreneurs
Occupational pension schemes (bAV) are more than just an additional benefit for entrepreneurs. They are a strategic tool for self-protection and can enhance the attractiveness of your company. Around 37 percent 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 security contributions. [__6__2] Therefore, careful planning is essential 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 method is crucial for success. Learn more about the 3 tiers of retirement provision.
An overview of the five methods of implementing occupational pension schemes
Entrepreneurs have five options available for implementing workplace pension schemes. [__3__5] Each option has specific advantages and disadvantages that need to be considered. The direct insurance is a classic method where the company enters into a contract with an insurance provider. [__1__1] Contributions are tax-free up to eight percent of the contribution assessment ceiling. [__5__1] The pension fund and the support funds are legally independent benefit institutions. [__2__5] The support fund often offers more flexibility in contribution amounts and is appealing to high-earning GGF, as contributions are often tax-free without limits. [__6__2,__1__1] The direct commitment (pension commitment) means that the company itself provides the pension benefits and makes provisions for them. [__2__5] This variety enables a customised company pension scheme.
The most common implementation methods for shareholder-managing directors are:
Direct insurance: Simple and flexible, suitable for smaller contributions. [__1__1]
Support 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 goals. [__2__5]
Pension funds: Often offers more promising investment opportunities. [__3__5]
Pension fund: External, regulated benefit institution. [__2__5]
The choice heavily depends on the individual situation and goals of the entrepreneur.
Maximising Tax Advantages and Pitfalls for Entrepreneurs
The occupational pension scheme offers significant tax advantages for entrepreneurs and their companies. Contributions to the occupational pension scheme are often deductible as business expenses, thus reducing the company's tax burden. [__7__2] For employees (including employed managing directors), contributions up to eight percent of the contribution assessment ceiling of the statutory pension insurance are tax-free. [__7__2] In 2024, this amounts to up to 7,248 euros. Pay attention to the exact contribution assessment ceilings, which may change annually. [__2__4] Upon payout during retirement, the benefits are taxable, often at a lower personal tax rate. [__3__4] A pitfall could be the so-called hidden profit distribution if promises to managing directors are not appropriately or independently set. Find out more about how you can deduct your occupational pension scheme for tax purposes.
Practical examples and design tips for corporate occupational pension schemes
A 45-year-old shareholder-managing director with an annual salary of 120,000 euros wants to close his pension gap. A combination of direct insurance to make full use of tax-free maximum amounts and a support fund for additional contributions can be beneficial. [__6__2,__1__1] Our expert tip: Have the adequacy of the provision regularly reviewed. The financial feasibility and earning capability of the commitment are important criteria for tax recognition. [__7__3] For direct commitment, clear regulations on financial feasibility and waiting times must be established. [__7__3] Careful documentation of all resolutions is essential, especially for controlling shareholder-managing directors. [__10__5] Also, consider whether a pension insurance for self-employed persons could be a complementary option.
Important design tips include:
Early start: The earlier you start, the lower the monthly burden for a respectable capital.
Regular adjustment: Review your occupational pension scheme every three to five years and adjust it to changing life circumstances.
Risk coverage: Consider covering occupational disability and survivor benefits. [__5__1]
Professional advice: Seek independent advice to find the optimal solution for your specific situation.
These points help create a solid foundation for your retirement provision.
Understanding risks and liability pitfalls in occupational pension schemes for entrepreneurs
Pension commitments can become a significant financial burden for companies if the provisions made are insufficient. [__9__1] More than two-thirds of pension commitments in Germany are not adequately covered. [__9__1] This can weaken the company's liquidity and creditworthiness. [__9__1] Another risk is longevity: If beneficiaries live longer than expected, benefits must be paid for a longer duration. Incorrect or unclear commitments can lead to tax arrears. [__9__4] In the case of a company sale, existing pension obligations can reduce the value or complicate the sale. [__8__3] A thorough review and, if necessary, outsourcing of pension obligations can be worthwhile. [__9__4] The question Is occupational pension provision sensible? must therefore always be answered on an individual basis.
Current case law and its impact on entrepreneurs
The case law on occupational pensions (bAV) is constantly evolving. The Federal Labour Court (BAG) has, for example, clarified that employers are generally not obliged to provide comprehensive information about all the details of occupational pensions. [__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 case of salary conversion. [__4__1] Our expert tip: Keep up to date with current rulings to minimise risks. The Lower Saxony Regional Labour Court decided on 20 April 2023 (3 Sa 86/22 B) on the entitlement to a bAV due to collective bargaining agreement reference clauses. [__4__2] These rulings demonstrate the complexity and the necessity of professional advice. The importance of occupational pensions is often redefined by such judgments.
Optimising the role of the support fund for GGF
The support fund is a popular implementation method for shareholder-managing directors, as it enables high pension benefits. [__12__3] Contributions are often unlimitedly deductible as business expenses. [__11__5] There are two main forms: the flat-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 provides a high level of security, even in the event of the company's insolvency, as claims are protected by the Pension Protection Association (PSVaG). [__11__5] The flexibility in contribution levels is a significant advantage. [__11__1] Administration costs are usually low and also tax-deductible. [__11__4] For comprehensive retirement planning, a Rürup pension can also be considered.
Use direct insurance as a component of managing managing benefits packages for top executives
Conclusion and your next step towards optimised company pension schemes
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 pensions.
The Association for Occupational Pensions (aba) provides information on labor cost surveys and expenses in the context of occupational pensions.
Statista provides a topic page on occupational pensions with relevant statistics.
Wikipedia explains the concept of salary conversion.
Wikipedia offers detailed information on the Company Pensions Act.
Wikipedia provides information on the Old-age Provision Act.
The Association for Occupational Pensions (aba) offers an overview of current statistics on occupational pensions.
WTW (Willis Towers Watson) provides a report on the effects of demographic change on occupational pensions.
FAQ
Is an occupational pension scheme mandatory for me as an entrepreneur?
If you have employees, you are required to offer them an occupational pension scheme through salary conversion. [__2__2] For your own provision as an entrepreneur (e.g. managing director), it is not mandatory per se, but highly recommended to close any provision gaps. [__6__2]
What role does my company form play in occupational pension schemes?
The type of business entity is very important. As a shareholder-director of a GmbH, you have different opportunities and tax conditions compared to, for example, a sole trader or freelancer. [__6__2]
What happens to my occupational pension scheme if I sell my company?
That depends on the implementation method. Pension commitments can reduce the company's 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 an entrepreneur, set up an occupational pension scheme for myself even without employees?
As a shareholder-managing director of a corporation (e.g., GmbH), you can set up an occupational pension scheme for yourself. For sole proprietors without employees, the options for a traditional occupational pension scheme are limited; private retirement solutions like the Rürup pension are often more suitable. [__5__1,__6__2]
How high should my contributions as an entrepreneur to the occupational pension scheme be?
The amount of contributions is very individual and depends on your pension goal, financial situation, and tax conditions. A precise analysis of your pension gap is the first step. It is often recommended to contribute up to ten to fifteen percent of your gross income.
What types of cover (e.g. disability insurance) can I integrate into my company pension scheme?
Many implementation methods of occupational pension schemes, such as direct insurance or support funds, allow for the integration of occupational disability insurance or survivor benefits. This is particularly important for entrepreneurs. [__5__1]
