Company pension scheme upon termination: Your guide for 2025
18 Apr 2025
5
Minutes
Katrin Straub
CEO at nextsure
A termination of the employment contract often raises questions about occupational pension schemes (bAV). Will your entitlements be preserved and what are the next steps? This article explains what happens to your occupational pension when you resign and how to optimally secure your provision.
The topic in brief and concise terms
When resigning, your occupational pension scheme entitlements from salary conversion are not lost; employer-financed contributions are vested after fulfilling certain conditions (e.g., 3 years of service, 21 years of age).
The most common options after termination are contribution suspension, transfer to the new employer (portability up to €96,600 in 2025), or private continuation.
A payout before the start of retirement is only possible in exceptional cases (e.g., a very small pension entitlement of less than 37.45 euros monthly pension in 2025); otherwise, the payout is made at retirement age and is then subject to tax and social security contributions.
Immediate Overview: Your occupational pension scheme upon termination
Terminating an employment relationship often leads to uncertainty regarding the occupational pension scheme (bAV). In general, it is usually not possible for employees to directly terminate the bAV contract. However, your accumulated contributions are typically not lost, especially if the vesting periods are met. In the case of a so-called 'small entitlement', where your expected monthly pension in, for example, the year 2025 is under 37.45 euros, a payout might be possible. The most common options are to suspend contributions, transfer the plan to a new employer, or continue the contract privately. The exact options depend on the type of your bAV and the contractual agreements. It is important to inform yourself early about the consequences of termination for your occupational pension scheme.
Understanding Vesting: When Your Occupational Pension Rights Are Secure
The concept of vesting is crucial when it comes to your occupational pension scheme in the event of resignation. Vesting means that your entitlements to the occupational pension benefits remain intact even if you leave the company before retirement. Contributions from salary conversion, meaning your own contributions, are legally vested immediately. This means that the money you have paid and the income it generates will remain yours in any case. There are specific deadlines for employer-financed portions. Since 1 January 2018, these claims are vested if the pension commitment has existed for at least three years and you are at least 21 years old upon leaving. Older commitments may be subject to different regulations, for example, a five-year period and a minimum age of 25 for commitments between 2009 and 2017. Therefore, carefully check when your commitment was made to be aware of your specific vesting periods. The legal vesting thus protects a significant portion of your accumulated pension. These regulations are enshrined in the Occupational Pensions Act (BetrAVG), particularly in § 1b BetrAVG. Knowing these deadlines is the first step to securing your entitlements.
Options after Cancellation: Here's What You Can Do
After a termination, you have various options for managing your occupational pension scheme. A direct payout of the capital is generally only intended at the start of retirement, except in the case of very small entitlements. Here are your main options:
Contribution Exemption: You make no further contributions. The contract is dormant, and the capital saved so far will continue to earn interest until retirement age. This is often the simplest solution when a transfer is not possible or desired.
Transfer to New Employer (Portability): You can have your accumulated capital transferred to the occupational pension scheme contract of your new employer. This is possible if the occupational pension scheme was through a direct insurance, pension fund, or pension plan and the contract was concluded after 2004. The transfer value must not exceed the contribution assessment ceiling (2025: 96,600 Euros), and the job change must not be more than a year ago. The new employer is obliged to offer a form of occupational pension scheme, usually direct insurance. Clarify the transfer of the occupational pension scheme early.
Private Continuation: With some implementation methods, particularly direct insurance, you can continue the contract privately with your own contributions. However, this means you will lose the tax advantages of salary conversion.
Leaving the Contract with the Old Employer (rare): In some cases, depending on the implementation method, the contract can simply remain with the old employer without any further contributions from you or the new employer.
Choosing the right option heavily depends on your individual situation and the terms of the new employer. Carefully weigh the pros and cons. The question of whether a pension scheme termination with payout is sensible usually only arises with very small entitlements.
Practical Scenarios: What Happens with Different Occupational Pension Paths
The handling of your company pension scheme upon resignation varies depending on the implementation method. With direct insurances, pension funds, and pension schemes, the transfer of capital to a new employer is often straightforward, provided that the legal requirements are met (see § 4 of the German Occupational Pensions Act regarding portability). An employee, aged 30, with a direct insurance and accumulated capital of 15,000 euros, can usually transfer this capital to a new employer if they offer direct insurance. With support funds and direct commitments (pension promises), the transfer is more complex and less common. In such cases, the commitment often remains with the former employer, or a severance payment is made if contractually agreed. In the event of the former employer’s insolvency, the Pensions-Sicherungs-Verein (PSV) often steps in to secure the promised benefits (up to a certain amount) for these implementation methods. Make sure you are well-informed about the specific regulations of your implementation method. If the new employer does not take over the direct insurance, making contributions exempt is a common alternative.
Tax aspects and social contributions upon payout
The payout of your occupational pension scheme at retirement age is subject to what is known as deferred taxation. This means that contributions were tax and social security advantaged during the savings phase, but the benefits must be fully taxed in retirement. However, your personal tax rate in retirement is usually lower than during your working life. Contributions to health and long-term care insurance are also payable on the benefits. For those insured under statutory schemes, there has been an allowance for health insurance contributions on occupational pensions since 2020. In 2025, this allowance amounts to 187.25 euros per month. Only the amount exceeding this is used for calculating health insurance contributions. In the case of a lump-sum payment, which is possible with some contracts, the tax burden can be mitigated by using the one-fifth rule, provided certain conditions are met. An accurate calculation of deductions is essential for planning. Please note that tax deductibility during the saving phase results in deferred taxation.
Expert Depth: Legal Foundations and Key Sections
The legal framework for occupational pension schemes upon termination is established in the Occupational Pensions Act (BetrAVG). A key section is § 1b BetrAVG, which governs the vesting of entitlements. It defines the minimum requirements (age, duration of the promise) for the entitlement to employer-financed benefits. § 4 BetrAVG (portability) is relevant for the transferability of entitlements. This section grants employees, under certain conditions, the right to transfer their pension capital to a new employer. The amount that can be transferred is linked to the contribution assessment ceiling in the general pension scheme. § 3 BetrAVG addresses the settlement of small entitlements. This regulation allows employers (and in certain cases also employees) to settle minor entitlements prematurely. Our expert tip: If you have any uncertainties regarding your entitlements or the application of these sections, you should seek professional advice. The importance of occupational pensions is significant, so a thorough examination is worthwhile. The question of whether an occupational pension is worthwhile should also be considered in the context of these regulations.
Current court rulings can influence the interpretation of these laws. For example, the Federal Labour Court (BAG) has strengthened employee rights in various decisions regarding transfer and vesting. It is advisable to stay informed about the current jurisprudence, as this can affect your specific case. An example includes the calculation of vesting periods or the assessment of pension capital upon transfer. The transfer period is generally twelve months after the end of the employment relationship.
Recommendations for action: How to optimize your occupational pension provision
To secure your occupational pension in the best possible way when leaving a job, you should act proactively. Here's a checklist for you:
Gather Information: Request a current statement of your occupational pension scheme (bAV) from your (former) employer or the pension provider. This will include details of your entitlements and the method of implementation.
Check Vesting: Determine which parts of your entitlements are already vested. This particularly concerns employer-financed portions.
Discussion with New Employer: Speak early with your new employer about the possibilities of the bAV. Ask about the available implementation methods and the willingness to take over your existing bAV or transfer the capital.
Compare Options: Weigh up the pros and cons of transferring, suspending contributions, and private continuation. Consider costs, return opportunities, and your personal life plans. A change of insurance should be well thought out.
Observe Deadlines: Generally, there is a deadline of one year after leaving to transfer the capital.
Seek Advice: For complex contracts or uncertainties, professional advice is recommended, for example, from us at nextsure.
Our Expert Tip: Document all agreements and deadlines carefully. A well-informed decision can help you avoid financial disadvantages and optimise your pension planning. Remember, old insurance policies often have good terms that are worth examining.
nextsure: Your partner for secure retirement planning
More useful links
Gesetze im Internet provides the full text of § 2 of the Occupational Pensions Act (BetrAVG), which contains relevant provisions for occupational pensions.
Haufe examines the impact of a termination on occupational pensions, particularly concerning protected groups.
Haufe explains the legal entitlement to portability in occupational pensions and the conditions associated with it.
GDV (Gesamtverband der Deutschen Versicherungswirtschaft) provides information on how occupational pensions can be continued after changing employers.
Statista offers comprehensive statistics and data on occupational pensions in Germany.
ABA (Arbeitsgemeinschaft für betriebliche Altersversorgung) provides current statistics on the prevalence of occupational pensions.
Bundesfinanzministerium provides information on the tax treatment of pensions and retirement benefits.
Bundesministerium für Arbeit und Soziales (BMAS) offers a research report on the prevalence of pensions based on an employer survey.
FAQ
What happens to my company pension plan if I resign?
If you resign, your vested rights to the company pension scheme remain intact. You can usually put the contract on hold without contributions, transfer it to a new employer, or continue it privately. A direct payout is only possible in rare cases (small entitlement).
Will I lose my occupational pension when changing jobs?
No, your vested rights are not lost. Your own contributions (salary conversion) are always secure. Employer contributions are also secured after certain periods (e.g., three years of membership, age 21).
Can I cash out my occupational pension early?
An early payout is only possible for very small entitlements (mini-pensions, e.g. less than €37.45 monthly pension in 2025). Otherwise, the capital will be paid out only upon reaching retirement age and will then be taxed.
How do I transfer my company pension plan to my new employer?
You can request the transfer (portability) of your capital. This is usually possible with direct insurance, pension funds, and pension schemes if the contract was concluded after 2004, the capital is below the contribution assessment limit (€96,600 in 2025), and the change occurred less than a year ago.
What is a contribution exemption in occupational pension schemes?
With a contribution exemption, you no longer pay additional contributions into your occupational pension scheme contract. However, the capital accumulated so far remains intact, continues to earn interest, and will be paid out to you in retirement as a (reduced) pension or as capital.
What taxes are applied when the company pension is paid out?
Payouts from occupational pension schemes are fully subject to income tax in retirement (deferred taxation). Additionally, health and nursing care insurance contributions are applicable, with statutory insured individuals receiving an allowance for health insurance contributions (187.25 euros/month in 2025).
