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Occupational pension scheme

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How company pension schemes work

Occupational pension schemes (bAV) not only provide financial security for your future but also offer government support. Through company pension schemes such as direct insurance, pension funds, and pension trusts, you can benefit from tax and social security advantages. Are you unsure whether your statutory pension will be sufficient to maintain your standard of living in retirement? Occupational pension schemes offer you additional financial security for old age. Many employers now offer voluntary bAV benefits to their employees. Since January 1, 2019, employers have also been obligated to contribute 15% of the employee's share to the contract. Even if your employer doesn't participate, you can still benefit from the advantages of an occupational pension scheme. As an employee, you have the right to a bAV through salary sacrifice, where you convert parts of your salary into contributions to the bAV. This results in numerous additional benefits for you. Generally, employers support occupational pension schemes beyond the mandatory 15% contribution. This makes your company pension scheme even more effective and worthwhile. While you do have to pay taxes on the benefits in retirement, this is generally done at a lower tax rate than during your working years. Furthermore, the Company Pension Strengthening Act introduced additional advantages for employees. In retirement, only income from company pension schemes exceeding €164.50 (2021) must be reported to the statutory health insurance. Income up to this limit is exempt from health and long-term care insurance contributions.

We offer you a customized market analysis that is tailored entirely to your needs.

Individualized personal consultations
Comprehensive and transparent advice, including pension planning for all aspects of retirement provision.
Support even after a job change
More than 5 years of experience in the field of company pension schemes
Tailor-made contract service and customer service that is adapted to your individual requirements.

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Your contact persons

Philipp Badent

Smiling man in a navy polo standing in a bright office hallway with frosted glass panels behind him.

Jannis Klemm

Your contact persons

Philipp Badent

Jannis Klemm

Subject areas

Retirement provision

Subject areas

Retirement provision

Why is it advisable to take out a company pension plan?

An overview of the advantages of a company pension scheme:

A guaranteed lifelong pension: With a company pension scheme (bAV), you strengthen your retirement savings and receive a lifelong pension payment. A one-time capital payout is also possible if needed.

Securing your family: You have the option to financially protect your family members in the event of your death, thus offering them additional financial support.

Tax and social security savings: Contributions to company pension schemes are tax-free up to 8 percent of the contribution assessment ceiling for statutory pension insurance and exempt from social security contributions up to 4 percent. This allows you to save on taxes and social security contributions.

Only pay taxes when you receive your pension: Although pension payments are taxed, the tax rates are generally more favorable than during your working life.

Additional protection in case of occupational disability: You have the option of protecting your earning capacity with occupational disability insurance and thus receiving financial support in case of occupational disability.

Continuity when changing employers: If you change employers, you can either transfer your existing company pension plan or continue it with your own contributions. This ensures your pension remains uninterrupted.

No impact on Hartz IV benefits: In the event of unemployment, your company pension entitlements are protected from being counted towards Hartz IV benefits. This means that any capital you have accumulated up to that point will remain intact.

Our competent insurance brokers are happy to provide you with further information on the advantages of a company pension scheme and to advise you individually.

Frequently Asked Questions (FAQ)

What is company pension scheme (bAV)?

Occupational pension schemes encompass various financial benefits that employers can offer employees for their retirement. These include, for example, direct insurance, a pension fund, or a pension trust.

Who is entitled to a company pension scheme?

Every employee in Germany who pays into the pension insurance scheme is entitled to a company pension scheme, regardless of the type of employment contract or type of employment.

What does salary conversion mean and how is it implemented?

With salary conversion, employees can invest a portion of their gross income tax-free and without social security contributions in a company pension scheme. The converted salary is then used for retirement savings.

What are the advantages of using salary conversion?

Salary sacrifice arrangements allow employees to save on both taxes and social security contributions. Employers also have the option of contributing additional amounts to the agreement, and these contributions are protected in the event of the employer's insolvency.

What options are available for company pension schemes?

There are various options for company pension schemes, such as direct insurance, pension funds, pension trusts, support funds, and direct promises. The choice of the preferred form is up to the employer.

What advantages does company pension schemes offer compared to other forms of retirement provision?

It can be worthwhile to consider company pension schemes, especially if the employer contributes to the pension. It is therefore crucial to compare the terms and pension benefits of the different pension options.

What is the significance of the Occupational Pension Strengthening Act?

From 2019 onwards, the Company Pension Strengthening Act stipulates that the employer is obliged to make contributions amounting to 15 percent to a company pension contract concluded from 2019 onwards.

What tax advantages are there with company pension schemes?

Yes, in the area of salary conversion, the converted contributions are tax-free up to certain maximum amounts. However, the amounts paid out in retirement must be taxed.

What happens to company pension plans when changing employers?

When changing employers, you usually have the option of transferring your company pension plan to your new employer. Alternatively, you can often continue the contract privately or suspend it until you find a new job with a company pension plan.

Is company pension provision safe?

The security of company pension schemes is influenced by various factors. In principle, contributions are protected in the event of employer insolvency. Furthermore, Germany has a statutory guarantee fund that secures pension payments in the event of insolvency of the pension fund or pension scheme. However, it is advisable to consider the employer's financial situation and the terms and conditions of the chosen pension plan.