fbpx

bAV Germany – Betriebliche Altersvorsorge

(company pension scheme)

Germany has a three-pillar retirement system, and the bAV is part of the second pillar. The bAV refers to company pension schemes that employees can utilize to strengthen their pension contributions for retirement. However, while the bAV offers numerous advantages, it also has its fair share of disadvantages that you should consider to determine whether or not it is the right option for you.

Who is eligible to apply for Company Pension Schemes in Germany?

Though company pension schemes are not compulsory employees prefer to choose them due to their tax breaks and government subsidies.

couple reading papers, bAV Germany
Filling Company Pension Scheme Form

Which payout methods does bAV Germany provide?

A Quick Roundup of Betriebliche Altersvorsorge in Germany
(Company Pension Schemes Germany)

All employees in Germany can participate in company pension schemes. This allows you to convert part of your salary into pension contributions.

How does deferred compensation work?

You can ask your employer to convert a portion of your salary into a company pension scheme (that is, you can ask them to hold back part of your salary and put it into a company pension plan instead). Once you opt for a bAV, your employer is legally required to contribute up to 8% of your gross salary, with a maximum annual limit of €7,008.

Before taxes and social security contributions, 4% of your gross salary is deducted for the pension scheme. An additional 4% may also be deducted, which lowers your taxable income and reduces your tax and social security contributions.

Change jobs

what happens When you change jobs?

If you change jobs, you can take the accumulated savings from your company pension scheme with you. These schemes operate on principles similar to private pension insurances. Your employer selects an insurance provider to manage the investments.

 

employer contributions and bRSG Legislation

Under the BRSG (Occupational Pensions Strengthening Act), which took effect on January 1, 2018, your employer must contribute 15% of your pension scheme contributions due to savings from reduced social security contributions.

When you receive benefits from the pension scheme, whether during retirement or at another time, you will need to pay taxes and social security contributions. If you signed up for the pension scheme after 2012, you can claim benefits starting at age 62, or when you first claim your full German state pension.

 

effect on state pension

You should know that reducing your social security contributions for the company pension scheme will also lower your contributions to the mandatory German state pension, which may slightly reduce the amount of government pension you receive.

What is bAV explained simply?

The Betriebliche Altersvorsorge (bAV), or company pension scheme, is a vital component of Germany’s three-pillar retirement system. It provides employees with an opportunity to bolster their pension contributions for retirement. Essentially, the bAV allows individuals to save a portion of their salary into a pension scheme, which can then be accessed during retirement years. While the bAV offers numerous advantages such as tax breaks and government subsidies, it’s essential to understand its complexities and whether it aligns with your financial goals. For a comprehensive understanding of how bAV works and whether it’s the right choice for you, consider consulting MW Expat. Our expert advisors offer free and independent consultations tailored to your unique needs and circumstances.

Who pays out the company pension scheme?

The betriebliche Altersversorgung (bAV), or company pension scheme, is typically funded by both the employer and the employee. Employers are legally obligated to contribute to their employees’ bAV schemes, with the amount typically determined by the terms of the employment contract and regulatory requirements. Additionally, employees may choose to make voluntary contributions to their bAV schemes, further enhancing their retirement savings. Understanding the contribution dynamics of bAV is essential for individuals planning their retirement strategies. For expert guidance on optimizing your bAV contributions and maximizing your retirement income, MW Expat offers free and independent consultations tailored to your specific needs and circumstances.

Complete the form to connect with our pension expert and receive complimentary advice

What our clients say about our services

GOWRI S.
GOWRI S.
Proven Expert Review
Read More
I have had an incredible experience with Dabar Reimer. She is very well experienced and was able to provide solutions for multiple scenarios. I am very thank full to her and highly recommend having a discussion with Dabar before choosing your next insurance policy.
Grant F.
Grant F.
Proven Expert Review
Read More
They have been so patient and thorough with helping during every step. I couldn’t imagine doing this on my own!
Chew Teck S.
Chew Teck S.
Proven Expert Review
Read More
My agent, Anja Lampert is super friendly and helpful throughout the entire process. Excellent service provided.
Anonymously
Anonymously
Proven Expert Review
Read More
The support I have received from Dabar was outstanding. She was always available to answer all my questions, and helped me out through the whole process. Thank you so much!
Nikos
Nikos
Proven Expert Review
Read More
I have appointed with Alex as the to-go person for all matters. Honestly he is providing the best service someone can get in Germany, solving problems literally in minutes! Highly recommend MW Expat Solution!
Anonymously
Anonymously
Proven Expert Review
Read More
It was a brilliant experience with MW expat. Right from filling up my details online, receiving a prompt call to book an appointment for detailed discussions of my needs to finally having a zoom call to talk to an advisor face to face was quick efficient, and re-assuring. I had the privilege to talk to Adriana Gonzalez, who was nothing short of brilliant. She was extremely composed, utterly professional, and very helpful.
Previous
Next