The occupational pension scheme, sometimes casually called "pension from the boss", is not a new invention. The first pension schemes for miners existed as early as the late Middle Ages. With industrialisation in the 19th century, workers of large corporations such as Krupp, Siemens or BASF also benefited from company pension schemes. But it was not until 1974, with the Company Pensions Act, that the legal framework was made binding.

Today, more than half of all employees subject to social security contributions are entitled to occupational pension benefits. Employees in large companies and in important and well-organised sectors such as the metal and chemical industries are best provided for. In small companies, on the other hand, the pension from the boss is often still a scarce commodity. Since 2002, every employee has been entitled to an occupational pension - at least if he or she finances the contribution from his or her income ("deferred compensation"). But although occupational pension schemes offer many advantages, such as tax incentives, not everyone makes use of them.

In the classic variant, the employer pays the contribution costs. In this way, the employer assumes social responsibility and increases its chances of finding suitable employees and retaining them in the company in the long term. In the case of deferred compensation, the employee finances his or her pension by using part of his or her gross income for the occupational pension. Of course, mixed forms are also possible. For example, the employer can contribute saved non-wage labour costs to the pension. This is even mandatory for contracts concluded since 2019. Some collective agreements also allow capital-forming benefits to be used to build up a company pension.

For employees, deferred compensation is also worthwhile because they save taxes and social security contributions during their working life. Only the later benefits are taxed. Then the individual tax rate is usually lower than during the active period. By the way, if the employee finances his contract, he does not take any risk: he has a vested claim to the benefits from the beginning.

Since 2002, the law has known five different forms of occupational pension schemes ("implementation paths"). Each has its advantages and special features. In 2018, a sixth implementation path was added with the Occupational Pension Strengthening Act (Betriebsrentenstärkungsgesetz). However, the matching insurance options have been hard to find so far. Only an individual consultation will show which form of occupational pension is best suited for you. If you want to get an overview of the options in advance, just read on. In the following, we will introduce you to the implementation methods.

Direct insurance is the best-known variant for occupational pension provision in Germany and is also the most widespread. Small and medium-sized companies in particular have opted for it. The company insures the employee who is a beneficiary under the contract. The entitlement to pension benefits becomes vested if the pension commitment has existed for at least three years and the employee is 21 years of age or older. The maximum beneficiary contribution is based on the contribution assessment ceiling in the statutory pension insurance and remains tax- and social security-free. Subsequent benefits must be taxed. Within the framework of a direct insurance, survivors' benefits and benefits in the event of occupational disability can also be insured. We would be happy to work with you to determine your individual options and benefits.

The pension fund is a legally independent company. Employees and their survivors have a legal claim to the promised benefits. Within the tax limits, the contribution can be flexibly adjusted at any time. The Pensionskasse pays the benefits directly to the beneficiary(ies). If the contribution was paid tax-free, the subsequent benefits are taxable. Survivors' benefits and benefits in the event of occupational disability can also be insured here.

In the past, only larger companies set up their own provident funds. In the meantime, there are also inter-company provident funds that small and medium-sized companies can join. The employer joins the provident fund and gives the employee a pension commitment. Benefits are payable on the basis of a so-called benefit plan. The employee does not have to pay tax on the contributions during his active working life. Only the later benefits are taxable.

With a direct commitment, the employer promises the employee a pension. Later, he pays the benefits directly to the beneficiary or his survivors. In principle, therefore, no external pension providers are involved here. Nevertheless, the company can outsource external risks to an insurance company. In these cases, a reinsurance policy is taken out.

The pension fund was only introduced in Germany in 2002 as the fifth implementation path of the occupational pension system. It is a legally independent pension institution that promises benefits to employees and their dependents. As with Pensionskasse and direct insurance, employees can make tax-free contributions within defined limits ("deferred compensation"). Pension funds offer the opportunity to invest in high-potential investments such as shares.

The state is promoting the spread of occupational pension provision. However, the provision still falls short of expectations. In order to reach even more employees and their employers, the Occupational Pension Strengthening Act (Betriebsrentenstärkungsgesetz) came into force in January 2018. In particular, it is intended to ensure that employees in small and medium-sized companies provide for their pensions more frequently through their company. Numerous incentives were created for this purpose. The most important innovations include the expansion of the tax allowance and a subsidy for low earners (income up to 2,575 euros per month) through tax subsidies to the company. In addition, the Riester basic allowance was increased from 154 to 175 euros per year and the obligation to contribute to the health and long-term care insurance of pensioners ("double contribution") was abolished for Riester contracts.

The following applies to direct insurance, pension funds and pension funds: If the employer saves social security contributions through deferred compensation, it must pass on its advantage as a flat-rate contribution subsidy of 15 per cent since 2019. This applies to newly concluded contracts. For existing contracts, the regulation will only apply from 2022.

The social partner model is an important component of the Occupational Pensions Strengthening Act. It provides for regulations on occupational pension schemes to be agreed in collective agreements. The new contracts have no guaranteed benefits and offer higher potential returns. In this case, the employee alone bears the investment risk. The social partner model is a further implementation channel in addition to the five existing models. It must first conquer its position in the market.

Occupational pension provision is worthwhile. It helps to be able to afford the retirement you deserve. Since 2002, employees have even had a legal right to a company pension. This also applies to part-time and marginal employees. Your employer takes care of the administration and is the contractual partner. It also passes on the contribution, regardless of who finances it.
Many employers participate in the contribution. Since 2019, this has even been mandatory for new contracts - insofar as the employer saves social security contributions. For existing contracts, this regulation has been in effect since 2022. In some sectors, companies have already committed themselves earlier in collective agreements to pay a subsidy for the occupational pension of their employees. In the event of parental leave or prolonged illness, you can continue your occupational pension from your own funds. In these cases, you should seek our advice beforehand. As a rule, you can take the entitlements you acquired with a previous employer with you to your new boss. Your occupational pension entitlements are protected in the event of the employer's insolvency and are not lost even if the employer goes bankrupt.

A company pension scheme is worthwhile - not only for your employees, but also for your company. It helps you in your search for new employees and helps to increase the loyalty of existing employees to your company. The occupational pension scheme is therefore an effective instrument against today's labour shortage. It helps you to strengthen your attractiveness as an employer. In addition, you fulfil your social responsibility towards your employees. Apart from that: Employees also have a legal right to occupational pension provision if they finance the contribution themselves ("deferred compensation").
Occupational pension provision can be outsourced. The administrative burden is then reduced and often approaches zero. In addition, occupational pension schemes can be designed to be balance sheet neutral. If you grant employees with low incomes ("low earners", up to 2,575 euros per month) an occupational pension, you receive a tax subsidy from the state. If deferred compensation is agreed, employees bear the economic costs alone. Employers only have to pass on their social security savings. This applies to newly concluded contracts since 2019. For existing contracts, the regulation has been in effect since 2022.