Optimising pension insurance in the public sector: your path to financial security in retirement
17.04.25
10
Minutes
Katrin Straub
Managing Director at nextsure
Retirement provision in the public sector often appears complex. Many employees wonder what their pension in later life will actually look like and what role supplementary pension schemes play. This article explains the basics and shows you concrete steps you can take to secure your future.
The topic in brief and concise terms
Retirement provision in the public sector is based on the statutory pension and a mandatory supplementary pension scheme (e.g. VBL).
In addition to the retirement pension, VBL also provides cover in the event of reduced earning capacity and for survivors.
Voluntary supplementary insurance plans such as VBLextra make it possible to top up retirement benefits individually and make use of government support.
Understanding the foundation: Statutory pension insurance and supplementary pension provision in the public sector
For employees covered by collective agreements in the public sector, retirement provision is based on two main pillars. Statutory pension insurance (GRV) forms the foundation, into which all employees pay. In addition, most employees are required to have insurance with an additional pension scheme, such as the VBL. This occupational pension scheme supplements the statutory pension and is intended to help secure living standards in old age. The VBL is the largest supplementary pension institution in Germany.
Contributions to statutory pension insurance are shared equally between employees and employers. In 2023, total expenditure by the German Pension Insurance amounted to 379.8 billion euros. The supplementary pension is also financed through levies or contributions, with the employer often covering the larger share. The aim is to close a pension gap in old age that could arise from the statutory pension alone. The combination of both systems is crucial for comprehensive retirement provision. This lays the foundation for further planning.
The supplementary pension in detail: how it works and benefits of the VBL
The Federal and State Pension Institution (VBL) provides occupational pension provision for many public sector employees. The basis is usually the Collective Agreement on Occupational Pensions (ATV). Registration for VBLklassik, the compulsory insurance scheme, is generally automatic when employment begins, provided that the age of seventeen has been reached and the waiting period of sixty calendar months can be met. This waiting period is deemed fulfilled if pension entitlements can be accrued for three years from 1 January 2018.
The VBL offers a range of benefits, including a lifelong occupational pension in retirement and pensions in the event of reduced earning capacity. Survivors’ benefits are also part of the package. The amount of the occupational pension from VBLklassik is calculated on the basis of pension points accumulated during the period of insurance. More than 5.2 million insured persons benefit from this form of occupational pension provision. An additional pension in the public sector can therefore make an important contribution to financial stability. Next, we will look at the differences compared with civil servants’ pension provision.
Understanding the distinction: pension insurance for employees versus civil service pension scheme
Retirement provision in the public sector differs fundamentally between employees and civil servants. Employees are compulsorily insured in the statutory pension insurance scheme and additionally receive an occupational pension through a supplementary pension fund such as the VBL. Civil servants, on the other hand, do not pay into the statutory pension insurance scheme. After their service, they receive a pension, also called a retirement pension, which is financed directly by the employer from tax revenues.
The basis for calculation differs: employees' pension is based on the contributions paid in and pension points. Civil servants' pension is determined by the pensionable service remuneration of the last two years before retirement and the length of service. The maximum pension rate for civil servants is 71.75 per cent of the final salary, attainable after at least forty years of service. Pensions often cover basic and supplementary provision, whereas employees have two separate systems. This distinction is important in order to correctly categorise your own pension insurance. Now on to the specific calculations.
The calculation of retirement benefits: Insights into pension points and provision points
The amount of the statutory pension for employees in the public sector depends on the accumulated earnings points (pension points). These points are based on your own earnings in relation to the average income of all insured persons. An average earner receives around one earnings point per year. The formula for calculating the pension is: earnings points x access factor x current pension value x pension factor = monthly pension. The current pension value is adjusted annually; since 2023 there has been no difference between East and West anymore.
For the supplementary pension with the VBL, pension points are accrued. These are calculated depending on the annual salary subject to supplementary pension contributions and the person’s age. In the event of retirement, these pension points are multiplied by a measurement amount to determine the occupational pension. For example: with 50 earnings points and a current pension value of EUR 39.32 (as of 2024), this results in a monthly gross pension of EUR 1,966 from the statutory insurance. The VBL provides annual information on the development of the occupational pension via the pension account. These calculations are a basis, but there are also obligations and options.
Mandatory and optional: compulsory insurance and voluntary additional options
Cover under VBLklassik is compulsory insurance for most employees covered by collective bargaining agreements in the public sector. This follows from collective agreements such as TVöD or TV-L. Registration is carried out by the employer if the requirements, such as the minimum age of seventeen and the fulfilment of the waiting period of sixty months, are met. Certain groups of people, for example employees with fixed-term academic positions, may in some circumstances be exempted.
Alongside the compulsory VBLklassik insurance, there is the option of topping up retirement provision voluntarily. VBLextra is such voluntary insurance, with which employees can make additional provision for retirement. State subsidies such as the Riester pension or tax advantages through salary conversion are possible here. Salary conversion makes it possible to pay part of your gross salary into retirement provision with tax and social security advantages. This additional provision layer can be decisive. Please also note the current legal framework.
Current developments and expert tips for your retirement planning
The public-sector pension insurance system is subject to adjustments and legal changes. For example, the vesting period for occupational pension entitlements was shortened to three years in 2018. The tax treatment of contributions, such as salary conversion, is also being adjusted in stages; from 1 January 2025, the tax-free maximum amount will increase to four per cent of the contribution assessment ceiling. It is advisable to stay up to date with such changes, as they can have a direct impact on your retirement planning.
Our expert tip: Check your VBL insurance statement and your pension information from the German Pension Insurance regularly. Check the reported periods and earnings, as errors can negatively affect the later pension amount. In cases of uncertainty or complex situations, such as incapacity for work or questions about the VBL widow’s pension, professional advice can be useful. Also make use of the opportunity to close gaps in cover at an early stage with voluntary supplementary insurance. Careful planning is the key to a secure future.
Pension provision in the public sector offers a solid foundation, but individual life circumstances require a tailored strategy. Factors such as part-time work, child-raising periods or interruptions in your employment history can affect pension entitlements. The question of whether private health insurance becomes relevant in later life should also be considered. A precise analysis of your personal situation is therefore essential in order to identify gaps in cover and make use of optimisation potential. The average monthly company pension from the ZVK pension currently amounts to around 315 euros, which illustrates the need for individual top-ups.
At nextsure, we see ourselves as your partner for digital and tailored insurance solutions. With our focus on niche products and fully digitalised advice, we support you in shaping your retirement provision in the public sector in the best possible way. Early and well-founded planning secures your financial freedom in retirement. Let us optimise your cover together.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete recommendations for optimisation.
More useful links
The German Pension Insurance provides comprehensive information on statutory pension insurance on its website.
The German Pension Insurance North Bavaria provides information on the benefits of employment in the public sector.
Information on collective agreements at German Pension Insurance can be found on its website.
The German Pension Insurance explains in detail how you can apply for your pension.
Wikipedia provides a comprehensive overview of supplementary pension schemes in the public sector in Germany.
The Federal Agency for Civic Education (bpb) highlights the aims of supplementary pension schemes in the public sector.
The Education and Science Union (GEW) provides general information on VBL supplementary pension schemes.
FAQ
How is my pension in the public sector calculated?
Your pension as an employee in the public sector consists of the statutory pension (based on pension points) and the occupational pension from the supplementary pension fund, such as the VBL (based on pension points). Both systems have their own calculation formulas, which take earnings and insurance duration into account.
What benefits does the VBL offer?
VBL offers a lifelong occupational pension, cover in the event of reduced earning capacity, survivor benefits, guaranteed interest in certain phases and often lower administrative costs. Maternity leave and parental leave periods are also taken into account.
What happens to my supplementary pension if I change jobs outside the public sector?
Your accrued entitlements with the supplementary pension scheme (e.g. VBL) up to the time you leave generally remain in place (vesting after completion of the qualifying period). The insurance is then continued on a contribution-free basis. If you change to another employer in the public sector, insurance periods can often be taken into account.
From when am I entitled to benefits from the supplementary pension scheme?
You will generally be entitled to benefits from the supplementary pension scheme (e.g. VBL pension) once you have completed the waiting period of 60 months and the insured event (e.g. reaching the standard retirement age and receiving a statutory state pension) has occurred.
Do I have to apply for my VBL pension?
Yes, you will only receive the occupational pension from VBL upon application. It is important to submit this in good time before the desired retirement start date.
Are contributions to the VBL tax-deductible?
Contributions to the compulsory VBLklassik insurance are partly paid from taxed income. For voluntary supplementary insurance plans (e.g. VBLextra through salary conversion), contributions may be exempt from tax and social security contributions up to certain upper limits. The pension benefits are taxable later.
