Company pension scheme on termination: Your guide for 2025
18.04.25
11
Minutes
Katrin Straub
Managing Director at nextsure
Termination of an employment contract often raises questions about occupational pension provision (bAV). Do your entitlements remain intact, and what are the next steps? This article explains what happens to your occupational pension provision when you leave your job and how you can secure your retirement provision as effectively as possible.
The topic in brief and concise terms
On termination, your occupational pension entitlements from salary conversion are not lost; employer-financed portions become vested once the required periods have been met (e.g. 3 years' service, age 21).
The most common options after termination are paid-up status, transfer to the new employer (portability up to EUR 96,600 in 2025) or private continuation.
An early payout before retirement begins is only possible in exceptional cases (e.g. a small vested entitlement of under EUR 37.45 monthly pension in 2025); otherwise, payment is made in retirement and is then subject to tax and social security contributions.
Quick overview: your company pension scheme on termination
Termination of employment often leads to uncertainty regarding occupational pension provision (bAV). In principle, direct cancellation of the bAV contract by the employee is usually not possible. However, your accumulated contributions are generally not lost, especially if the vesting periods have been met. In the case of what is known as a small entitlement, if your expected monthly pension is below 37.45 euros in 2025, for example, a payout may be possible. The most common options are paid-up status, transfer to the new employer or private continuation of the contract. The exact possibilities depend on the type of your bAV and the contractual agreements. It is important to find out in good time about the consequences of termination for your occupational pension provision.
Understanding vesting: When your occupational pension entitlements are secure
The concept of vesting is crucial when it comes to your company pension scheme in the event of termination. Vesting means that your entitlements to occupational pension benefits remain intact even if you leave the company before retirement. Contributions from salary conversion, i.e. your own contributions, are legally vested immediately. This means that the funds you have paid in, together with the returns generated from them, are yours in any case. For employer-funded portions, certain deadlines apply. Since 1 January 2018, these entitlements have been vested if the pension commitment has existed for at least three years and you were at least 21 years old when you left. Older commitments may be subject to different rules, for example a five-year vesting period and a minimum age of 25 for commitments between 2009 and 2017. You should therefore check carefully when your commitment was granted so that you know your specific vesting periods. The statutory vesting thus protects a large part of the retirement provision you have built up. These rules are laid down in the German Occupational Pensions Act (BetrAVG), in particular in Section 1b BetrAVG. Knowing these deadlines is the first step towards securing your entitlements.
Options after termination: What you can do
After termination, you have various options for dealing with your occupational pension provision. A direct payout of the capital is usually only intended at retirement, except in the case of very small entitlements. Here are your main options:
Contribution-free status: You no longer pay any further contributions. The contract is put on hold, and the capital accrued to date continues to earn interest until retirement age. This is often the simplest solution if a transfer is not possible or not desired.
Transfer to the new employer (portability): You can have your accrued capital transferred to your new employer's bAV contract. This is possible if the occupational pension plan was set up via direct insurance, a pension fund or a pension scheme and the contract was concluded after 2004. The transfer value may not exceed the contribution assessment ceiling (2025: EUR 96,600), and the job change must not have taken place more than one year ago. The new employer is obliged to offer some form of occupational pension, usually a direct insurance policy. Clarify the transfer of the occupational pension at an early stage.
Private continuation: In some arrangements, particularly direct insurance, you can continue the contract privately with your own contributions. However, the tax advantages of salary conversion no longer apply.
Leaving the contract with the former employer (rare): In some cases and depending on the arrangement, the contract can simply remain with the former employer, without you or the new employer making any further contributions.
Choosing the right option depends heavily on your individual circumstances and the terms offered by the new employer. Weigh the pros and cons carefully. The question of whether a termination of occupational pension with payout makes sense usually only arises when entitlements are very small.
Practical scenarios: What happens with different occupational pension pathways
The handling of your occupational pension on termination varies depending on the implementation route. For direct insurance policies, pension funds and pension schemes, transferring the capital to the new employer is often straightforward, provided the legal requirements are met (see § 4 BetrAVG on portability). An employee, aged 30, with a direct insurance policy and accumulated capital of 15,000 euros, can usually take this capital to the new employer if they offer a direct insurance policy. For support funds and direct commitments (pension commitments), a transfer is more complex and less common. In such cases, the commitment often remains with the former employer, or severance compensation is paid if contractually agreed. In the event of the former employer's insolvency, the Pension Protection Association (PSV) often steps in for these implementation routes to secure the promised benefits (up to a certain amount). Find out exactly about the specific rules for your implementation route. If the new employer does not take over the direct insurance policy, making the policy paid-up is a common alternative.
Tax aspects and social security contributions upon payment
The payout of your occupational pension at retirement is subject to what is known as deferred taxation. This means that the contributions during the accumulation phase were tax- and social security contribution-advantaged, but the benefits in retirement must be taxed in full. 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 due on the benefits. For those covered by statutory health insurance, there has been an allowance for health insurance contributions on company pensions since 2020. In 2025, this amounts to EUR 187.25 per month. Only the amount above this is used to calculate the health insurance contributions. In the case of a lump-sum payment, which is possible with some contracts, the tax burden can be reduced through the one-fifth rule, provided the requirements are met. An accurate calculation of the deductions is essential for planning. Please note that tax deductibility during the accumulation phase entails deferred taxation.
Expert depth: legal foundations and key legal provisions
The legal framework for occupational pension provision in the event of termination is set out in the Occupational Pensions Act (BetrAVG). A key section is Section 1b BetrAVG, which governs the vesting of entitlements. It defines the minimum requirements (age, duration of the commitment) for retaining employer-financed entitlements. Section 4 BetrAVG (portability) is relevant for the transferability of entitlements. Under certain conditions, this section gives employees the right to take their pension capital with them to a new employer. The amount that can be transferred is linked to the contribution assessment ceiling in the general pension insurance scheme. Section 3 BetrAVG deals with the commutation of small entitlements. This provision allows employers (and, in certain cases, employees as well) to commute minor entitlements early. Our expert tip: If anything is unclear regarding your entitlements or the application of these sections, you should seek expert advice. The importance of occupational pension provision is high, so a close review is worthwhile. The question of whether occupational pension provision is worthwhile should also be considered in the context of these regulations.
Current rulings can influence the interpretation of these laws. For example, the Federal Labour Court (BAG) has strengthened employees' rights in various decisions regarding transfer and vesting. It is advisable to keep up to date with current case law, as this may affect your specific case. One example is the calculation of vesting periods or the assessment of pension capital on transfer. The transfer period is usually twelve months after termination of the employment relationship.
To secure your company pension provision as well as possible in the event of termination, you should act proactively. Here is a checklist for you:
Information gathering: Request an up-to-date statement of your bAV from your (former) employer or the pension provider. This contains details of the amount of your entitlements and the implementation method.
Check vesting: Clarify which parts of your entitlement are already vested. This applies in particular to employer-funded portions.
Talk to your new employer: Speak to your new employer early on about the options for bAV. Ask about the implementation methods offered and their willingness to take over your existing bAV or transfer the capital.
Compare options: Weigh up the advantages and disadvantages of transfer, paid-up status and continuing the policy privately. Take into account costs, return opportunities and your personal life plans. A switching of insurers should be carefully considered.
Observe deadlines: For the transfer of the capital, there is usually a deadline of one year after leaving.
Seek advice: With complex contracts or if you are unsure, professional advice, for example from us at nextsure, is recommended.
Our expert tip: Document all agreements and deadlines carefully. An informed decision will help you avoid financial disadvantages and shape your retirement provision optimally. Bear in mind that old insurance contracts often have favourable terms that are worth reviewing.
nextsure: Your partner for a secure retirement plan
The topic of occupational pension provision in the event of termination can be complex. At nextsure, we understand that you want clear and reliable advice. As a digital insurance portal, we offer tailored and easy-to-understand insurance solutions. We help you make the best decision for your situation when dealing with your bAV after termination. Our experts analyse your situation and show you how you can secure your entitlements and optimise your retirement provision. We support you in clarifying any outstanding questions and guide you through the necessary steps, whether that involves transferring your vested entitlements or reviewing alternative pension options. Rely on our expertise in the field of niche insurance and digital protection solutions.
Request your individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for improvement.
More useful links
Gesetze im Internet provides the full text of Section 2 of the Occupational Pensions Act (BetrAVG), which contains relevant provisions on company pension schemes.
Haufe examines the effects of dismissal on company pension provision, particularly with regard to protected groups of persons.
Haufe explains the legal entitlement to portability in company pension provision and the associated conditions.
GDV (Gesamtverband der Deutschen Versicherungswirtschaft) provides information on how occupational pension provision can be continued after a change of employer.
Statista offers comprehensive statistics and data on occupational pensions in Germany.
ABA (Arbeitsgemeinschaft für betriebliche Altersversorgung) provides up-to-date statistics on the prevalence of occupational pension provision.
Federal Ministry of Finance provides information on the tax treatment of pensions and retirement benefits.
Federal Ministry of Labour and Social Affairs (BMAS) provides a research report on the prevalence of retirement provision based on a survey of employers.
FAQ
What happens to my workplace pension if I resign?
If you leave your job, your vested entitlements to the company pension remain in place. You can usually make the contract paid-up, transfer it to your new employer or continue it privately. A direct payout is only possible in rare cases (small vested entitlement).
Do I lose my company pension if I change jobs?
No, your vested entitlements are not lost. Your own contributions (salary conversion) are always secure. Employer contributions are also safeguarded after certain periods (e.g. three years’ service, age 21).
Can I have my occupational pension paid out early?
Early payment is only possible for very small entitlements (small entitlements, e.g. under EUR 37.45 monthly pension in 2025). Otherwise, the capital is paid out only at retirement age and then taxed.
How do I take my bAV with me to my new employer?
You can apply for the transfer (portability) of your capital. This is usually possible for direct insurance policies, pension funds and pension schemes if the contract was concluded after 2004, the capital is below the contribution assessment ceiling (EUR 96,600 in 2025) and the switch was less than one year ago.
What is a contribution waiver in occupational pension provision (bAV)?
If your policy is made premium-free, you no longer pay any further contributions into your occupational pension contract. However, the capital you have accumulated so far remains intact, continues to earn interest and will be paid out to you in retirement as a (reduced) pension or lump sum.
What taxes apply when the occupational pension is paid out?
Payouts from occupational pension schemes (bAV) are fully subject to income tax in old age (deferred taxation). In addition, contributions to health and long-term care insurance are due, although there is an allowance for statutory health insurance members when it comes to health insurance contributions (EUR 187.25/month in 2025).
