Optimising pension insurance in the public sector: Your path to financial security in retirement
17 Apr 2025
7
Minutes
Katrin Straub
CEO at nextsure
Public service pensions often seem complex. Many employees wonder what their future pension will actually look like and what role supplementary benefits play. This article highlights the basics and shows you concrete steps for securing your future.
The topic in brief and concise terms
The retirement provision in the public sector is based on the statutory pension and a mandatory supplementary provision (e.g. VBL).
In addition to the retirement pension, the VBL also offers protection in case of reduced earning capacity and for survivors.
Voluntary supplementary insurances such as VBLextra allow you to individually top up your retirement benefits and take advantage of government subsidies.
Understanding the Foundation: Statutory Pension Insurance and Additional Provision in the Public Sector
For salaried employees in the public sector, the pension consists of two main pillars. The statutory pension insurance (GRV) forms the foundation, into which all employees contribute. Additionally, most employees are required to be insured in a supplementary pension scheme, such as the VBL. This occupational pension scheme complements the statutory pension and aims to help maintain the standard of living in retirement. The VBL is the largest supplementary pension institution in Germany.
Contributions to the statutory pension insurance are shared equally by employees and employers. In the year 2023, the total expenditure of the German Pension Insurance amounted to 379.8 billion euros. The supplementary pension is also funded through levies or contributions, with the employer often covering the larger portion. The goal is to close a pension gap in retirement that could arise solely from the statutory pension. The combination of both systems is crucial for comprehensive retirement security. This sets the foundation for further planning.
The supplementary pension in detail: Functionality and benefits of the VBL
The Pension Institution of the Federal and State Governments (VBL) administers occupational pension schemes for many employees in the public sector. This is generally based on the Collective Agreement for Pensions (ATV). Registration for VBLklassik, the mandatory insurance, is typically automatic when employment begins, provided the employee is at least seventeen years old and the qualifying period of sixty calendar months can be met. This waiting period is considered fulfilled if entitlements can be acquired for three years from 1st January 2018 onwards.
VBL offers various benefits, including a lifelong occupational pension in retirement and pensions in the event of incapacity. A survivor’s pension is also part of the benefits package. The amount of the occupational pension from VBLklassik is calculated based on pension points accumulated during the insurance period. More than 5.2 million insured individuals benefit from this form of occupational pension provision. An additional pension in the public sector can thus make a significant contribution to financial stability. Next, we'll look at the differences compared to civil service pensions.
Understanding the distinction: pension insurance for employees versus civil servant pensions
The retirement provision in the public sector fundamentally differs between employees and civil servants. Employees are mandatorily insured in the statutory pension scheme and additionally receive an occupational pension through a supplementary pension fund like the VBL. Civil servants, on the other hand, do not pay into the statutory pension scheme. They receive a pension after their service, also called a retirement salary, which is directly funded by the employer from tax funds.
The calculation bases are different: The pension of employees is based on the contributions paid and earnings points. The pension of civil servants is calculated based on the pensionable pay of the last two years before retirement and the duration of service. The maximum pension rate for civil servants is 71.75 percent of the last pay, achievable after at least forty years of service. Pensions often cover regular and additional security, while employees have two separate systems. This distinction is important to correctly classify your own pension insurance. Now to the specific calculations.
The calculation of retirement benefits: Insights into pension points and supply points
The amount of statutory pension for public sector employees depends on the accumulated earning points (pension points). These points result from one's income in relation to the average income of all insured persons. An average earner receives about one earning point per year. The formula for calculating the pension is: Earning points x access factor x current pension value x pension factor = monthly pension. The current pension value is adjusted annually; since 2023, there is no longer any difference between East and West.
For additional benefits with the VBL, benefit points are accumulated. These are calculated based on the supplementary pension-relevant annual earnings and age. In retirement, these benefit points are multiplied by a measurement amount to determine the occupational pension. An example: With 50 earning points and a current pension value of 39.32 euros (as of 2024), the statutory insurance results in a gross monthly pension of 1,966 euros. The VBL provides annual updates on the development of the occupational pension through the pension account. These calculations form a basis, but there are also obligations and choices.
Compulsory and Optional: Insurance Requirement and Voluntary Additional Options
Insurance under VBLklassik is mandatory for most salaried employees in the public sector. This obligation arises from collective agreements such as the TVöD or TV-L. The registration is done by the employer when the conditions, such as the minimum age of seventeen years and the fulfilment of the waiting period of sixty months, are met. Certain groups of people, such as employees with temporary scientific contracts, may be exempted under certain circumstances.
In addition to the compulsory insurance VBLklassik, there is the option to voluntarily increase retirement provision. VBLextra is such a voluntary insurance that allows employees to further prepare for retirement. In this context, government benefits like the Riester pension or tax advantages through salary conversion are possible. Salary conversion allows a portion of the gross salary to be paid into retirement provision with tax and social security benefits. This additional level of provision can be crucial. Please also consider the current legal framework.
Current developments and expert tips for your retirement planning
The system of public service pension insurance is subject to adjustments and legal changes. For example, the vesting period for occupational pension claims was shortened to three years in 2018. The tax treatment of contributions, such as salary conversion contributions, is also gradually being adjusted; from 1 January 2025, the tax-free maximum amount will increase to four per cent of the contribution assessment ceiling. It is advisable to keep informed about such changes as they can have a direct impact on your retirement planning.
Our expert tip: Regularly check your VBL insurance certificate and your pension information from the German Pension Insurance. Verify the reported periods and earnings, as errors can negatively affect the amount of your future pension. In case of uncertainties or complex situations, such as disability or questions regarding VBL widow's pension, professional advice can be valuable. Take advantage of the opportunity to close any gaps in your pension coverage early through voluntary supplemental insurance. Careful planning is the key to a secure future.
Your individual situation matters: Consultation for a tailored retirement plan
The pension scheme in public service provides a solid foundation, yet individual life circumstances require a tailored strategy. Factors such as part-time work, periods of child-rearing, or career breaks can affect pension entitlements. The question of whether private health insurance becomes relevant in old age should also be considered. Therefore, a precise analysis of your personal situation is essential to identify coverage gaps and make use of optimisation potential. The average monthly company pension from the ZVK pension currently amounts to approximately 315 euros, highlighting the necessity of individual top-ups.
We at nextsure see ourselves as your partner for digital and customised insurance solutions. With our focus on niche products and a fully digitised advisory service, we support you in optimally structuring your pension provision in public service. Early and well-informed planning ensures you financial freedom in retirement. Let us optimise your coverage together.
Request an individual risk analysis now: Have your insurance situation checked for free and receive concrete optimisation suggestions.
More useful links
The Deutsche Rentenversicherung offers comprehensive information on statutory pension insurance on their homepage.
The Deutsche Rentenversicherung Nordbayern provides information on the benefits of employment in the public sector.
You can find information on collective agreements at the Deutsche Rentenversicherung on their website.
The Deutsche Rentenversicherung explains in detail how you can apply for your pension.
Wikipedia offers a comprehensive overview of additional public service pensions in Germany.
The Federal Agency for Civic Education (bpb) highlights the goals of the supplementary pension in the public service.
The Education and Science Workers' Union (GEW) provides general information about the VBL supplementary pension.
FAQ
How is my pension in the public service calculated?
Your pension as a public sector employee is composed of the statutory pension (based on remuneration points) and the company pension from the supplementary pension fund like VBL (based on pension points). Both systems have their own calculation formulas that take into account earnings and insurance duration.
What benefits does the VBL offer?
The VBL offers a lifelong occupational pension, coverage for reduced earning capacity, survivor benefits, guaranteed interest during certain phases, and often lower administrative costs. Additionally, maternity and parental leave periods are taken into account.
What happens to my supplementary pension when changing jobs outside the public service?
The entitlements you have acquired with the supplementary pension scheme (e.g., VBL) up to your departure are generally retained by you (non-forfeitability after completing the waiting period). The insurance is then continued without contributions. When changing to another employer in the public sector, insurance periods can often be credited.
When am I entitled to benefits from the supplementary pension scheme?
You are generally entitled to benefits from the supplementary pension scheme (e.g. VBL pension) if you have met the waiting period of 60 months and the insured event (e.g. reaching the normal retirement age and receiving a statutory old-age pension) has occurred.
Do I need to apply for my VBL pension?
Yes, you will only receive the company pension from the VBL upon application. It is important to submit this application in good time before the desired pension start date.
Are the contributions to VBL tax-deductible?
Contributions to the mandatory insurance VBLklassik are partially paid from taxed income. For voluntary supplementary insurance (e.g. VBLextra through salary conversion), contributions can be tax and social security-free up to certain limits. Pension benefits are taxable later.
