New employer does not take over direct insurance: Your options and rights clearly explained
24 Apr 2025
5
Minutes
Katrin Straub
CEO at nextsure
A new job brings many changes, but what happens to your direct insurance if the new employer does not continue it? Many employees face this question and fear for their saved retirement solutions. This article highlights your four most important courses of action and how to secure your entitlements.
The topic in brief and concise terms
A new employer is not obligated to take over your existing direct insurance; however, there are at least four options (private continuation, capital transfer, contribution suspension, termination).
As a policyholder, if you continue the insurance privately, no health and long-term care insurance contributions will be due on the privately financed portion later.
The transfer of capital is often possible, but it may lead to the loss of old guarantees and usually must be applied for within a year.
Quick Facts: Direct insurance when changing employers – The Essentials in Brief
A change of job often raises questions about the existing direct insurance. Not every new employer is obliged to take on an old contract, which can initially mean uncertainty for employees. However, there are at least four clear options for how you can handle your direct insurance if the new employer does not take it over. Your acquired entitlements are generally secured, thanks to statutory regulations on the non-forfeitability of occupational pensions. The decision for one of the options should be carefully considered and depends on your individual situation as well as the contract details. Early clarification with the new employer and the insurer is crucial, often within a twelve-month period after changing jobs. This section gives you a quick overview of your options.
Problem Outline: Why does the new employer often not take over the direct insurance?
Many employees are surprised when the new employer refuses to take over the existing direct insurance. There are usually understandable reasons from the company’s perspective. A main reason is the issue of liability; the new employer would have to uphold the pension commitment of the old employer, which carries risks if the insurer does not provide the guaranteed benefits. Often, new employers have already established their own, standardised pension systems for their workforce. Integrating a single, differing contract would increase administrative effort by at least ten percent. Additionally, old contracts may contain terms (e.g., high guaranteed interest rates) that the new employer cannot replicate without significant additional effort. Furthermore, the employer’s mandatory contribution of fifteen percent to salary conversions, required from 2022, can lead to complications with old contracts if the insurer does not foresee this. These factors mean that a refusal to take over is not uncommon, even if your wish to retain the occupational pension exists.
Your detailed courses of action: Four ways for your direct insurance
If your new employer does not take over your direct insurance, there are generally four viable options available to secure your retirement benefits. Each option has specific advantages and disadvantages to consider. A careful review of your contractual conditions and personal financial objectives is essential. The choice affects not only the amount of your future pension but also tax implications and social security contributions. Here are the four main alternatives:
Private continuation of the contract: You assume the contract as the policyholder and continue to pay the contributions from your net income. This can be meaningful to maintain existing guarantees.
Transfer of capital (portability): The accumulated capital is transferred to a new contract with the new employer or their pension scheme. This is often possible within a year of changing jobs.
Suspension of contract contributions: You stop paying contributions. The contract remains in place, and the capital accumulated to date continues to earn interest until retirement age.
Termination and payout (rare and usually disadvantageous): A termination of the direct insurance is only possible in exceptional cases and is often associated with financial disadvantages, as taxes and social security contributions must be repaid.
The decision for one of these options should not be rushed. It is advisable to carefully consider the consequences of each alternative.
Option 1: Private Continuation – The saver takes control
Continuing your direct insurance privately is a commonly chosen option when the new employer does not take over the contract. You become the policyholder yourself and pay the contributions from your already taxed net income. A major advantage: Later, no health and long-term care insurance contributions are incurred for the privately saved portion if you are registered as the policyholder. This was confirmed by a ruling of the Federal Constitutional Court (1 BvR 1660/08). The application for private continuation should generally be made within fifteen months after leaving the former employer. Note that the tax advantages of salary conversion for this option are no longer available for future contributions. Existing guarantees and contractual conditions, such as a possibly high guaranteed interest rate of, for example, two percent from an old contract, are retained. Consider whether continuing payments without the tax incentives is profitable for you, especially compared to alternative pension options. The tax treatment of direct insurance changes fundamentally here.
Option 2: Capital transfer – New start with the new employer
Transferring the accumulated capital (coverage capital) to a new contract with the new employer is another option if they do not wish to continue your old direct insurance policy. This is also referred to as portability. The employee has a legal right to transfer under certain conditions if the commitment was made after 31 December 2004 and the transfer value does not exceed the contribution assessment ceiling (2023: €87,600 West). The application usually needs to be submitted within one year after changing jobs. The new employer then concludes a new contract, often within the framework of their own pension system, and the capital from your old contract is incorporated there. Warning: Disadvantages may arise. The original calculation principles, such as a high guaranteed interest rate, are lost. [1] The conditions of the new contract, which may be less favourable, apply. Additionally, fees may be incurred for the transfer, reducing your return by up to one percent. Carefully check whether the conditions of the new contract are attractive.
Option 3: Premium exemption – Let the contract rest
If neither a private continuation nor a capital transfer is an option for you because the new employer does not take over the direct insurance, you can have the contract made non-contributory. This means you no longer pay any further contributions. However, your previously acquired entitlements and the accumulated capital remain and will continue to earn interest until the agreed retirement date. This is often the simplest solution with the least administrative effort, taking only around an hour. The downside is that the originally planned pension amount will not be reached because no further payments are made. In the case of an early non-contributory period, it may also happen that the existing coverage capital is lower than the sum of the paid contributions, as initial and distribution costs, which are often spread over the first five years, have not yet been fully amortised. This option at least secures what has been achieved so far and is worth considering if the other options do not fit or if you are uncertain about your professional future with the new employer. The question "What happens to the occupational pension scheme upon termination?" is closely related here.
Expert Depth: Legal Foundations and Pitfalls (§ 4 BetrAVG)
The Occupational Pensions Act (BetrAVG) regulates the rights and obligations surrounding occupational pensions. In the event that the new employer does not take over the direct insurance policy, § 4 BetrAVG is particularly relevant. This paragraph addresses the transfer and continuation of entitlements. [2] Generally, there is no obligation for the new employer to adopt an existing contract one-to-one. [1] However, they may be required to offer an equivalent commitment under their own pension scheme if the employee requests this within a year and if the conditions for portability (contract concluded after 2004, transfer value below the contribution assessment ceiling) are met. [3] An important point is the vesting of entitlements: Entitlements financed through salary conversion are immediately vested by law. [5] This means your previous contributions and the income generated from them are not lost. Our expert tip: When continuing privately, make sure you are registered as the policyholder to avoid the obligation to pay health and long-term care insurance contributions on the privately financed part. [4] This is a detail that is often overlooked and can amount to several hundred euros per year in old age. The avoidance of health insurance contributions is an important aspect here.
Tax and social security implications of the various options
Conclusion and Recommendations: Proactively Shaping Your Retirement Planning
More useful links
Ihre Vorsorge provides comprehensive information on occupational pensions and the implications of changing jobs.
Paychex provides useful knowledge regarding direct insurance upon termination of employment.
Haufe informs about occupational pensions, their termination, and changes of employer, including the right to transfer.
The Arbeitsgemeinschaft für betriebliche Altersversorgung (aba) offers a detailed glossary entry on the term 'transfer' in the context of occupational pensions.
Gesetze im Internet provides the complete text of § 4 of the Occupational Pensions Act (BetrAVG), which regulates the transfer of pension entitlements.
The Gesamtverband der Deutschen Versicherungswirtschaft (GDV) explains how occupational pensions can be continued after a change of employer.
The Pensions-Sicherungs-Verein (PSVaG) answers frequently asked questions regarding occupational pensions and their safeguarding.
The Bundesfinanzministerium offers an official glossary entry on the topic of retirement planning.
FAQ
Does my new employer have to take over my old direct insurance?
No, the new employer is not generally obliged to take over your old direct insurance. They may choose to do so but are not compelled. Liability risks or administrative effort are often cited as reasons for refusal.
What are the advantages of privately continuing my direct insurance?
The main advantage is that no health or long-term care insurance contributions are deducted from the privately funded portion of your future pension, provided you are listed as the policyholder. Additionally, old contract terms such as guaranteed interest rates remain intact.
What does 'Beitragsfreistellung' of my direct insurance mean?
Premium exemption means that you no longer pay any more contributions into the contract. However, the capital accrued so far remains intact, continues to earn interest, and is paid out to you when you retire. The originally planned pension amount will not be achieved as a result.
Is it advisable to terminate the direct insurance when changing employers?
A termination is rarely sensible and often associated with significant financial disadvantages. Generally, saved taxes and social contributions must be repaid, and the surrender value may be lower than the contributions paid.
What is the difference between acquisition and transfer of direct insurance?
In the event of a takeover, the new employer enters into the existing contract with all rights and obligations. With a transfer (portability), the accumulated capital from the old contract is transferred to a new contract with the new employer or its pension scheme, usually under new conditions.
What role does § 4 BetrAVG play if the new employer does not take over the direct insurance?
§ 4 of the Occupational Pensions Act (BetrAVG) regulates the possibilities for the continuation and transfer of pension entitlements in the event of a change of employer. It forms the legal basis for options such as capital transfer and sets out certain conditions and deadlines.
