Cancellation in the savings phase and the surrender value
Private pension insurance comes in two basic types. With a deferred annuity the savings phase is followed by the pension phase; an immediate annuity starts against a single premium.
For as long as ongoing premiums are payable, you can cancel the contract under § 168(1) VVG at any time, to the end of the current insurance period. The same applies to a single premium, provided the occurrence of the insurer’s obligation to pay is certain (§ 168(2) VVG).
For contracts intended for retirement provision, § 168(3) VVG bars this right of cancellation. That covers certified basic pension contracts (Rürup) whose entitlements cannot be realised, and contracts whose realisation has been irrevocably excluded to secure protection from seizure under § 851c or § 851d ZPO.
Otherwise the insurer owes the surrender value. § 169(3) VVG sets it at no less than the amount produced by spreading the acquisition and distribution costs evenly over the first five years of the contract. This limit caps Zillmerisation, that is, the setting off of acquisition costs against the first premiums.
A further deduction is permitted under § 169(5) VVG only where it is agreed, quantified and reasonable. An agreement to deduct acquisition and distribution costs not yet amortised is invalid. Even so, the surrender value can still fall below the premiums paid.
The revocation joker for older policy-model contracts
If your contract was concluded between 1994 and 2007 under the policy model pursuant to § 5a VVG, what matters is the notice given of the right to object. The Federal Court of Justice (BGH) held in its judgment of 7 May 2014 (IV ZR 76/11) that § 5a(2) sentence 4 VVG in its version then in force must be interpreted in conformity with the directive and does not apply to life and pension insurance.
This situation is known as the revocation joker. Anyone who was not properly informed can object to the conclusion of the contract without any time limit, because the exclusion period under the provision as it then stood does not apply.
The objection leads to unwinding under the law of unjust enrichment. You can reclaim the premiums paid and the benefits the insurer derived from them. You must give credit for the value of the insurance cover you enjoyed, which the BGH assesses by reference to the premium calculation and the risk components.
For contracts concluded from 1 January 2008, § 152 VVG applies. The revocation period is 30 days, and the right of revocation lapses at the latest 24 months and 30 days after the contract was concluded.
Tax consequences of cancellation
Taxation depends on when the contract was concluded and on the form of payout. § 20(1) no. 6 EStG and the transitional rules of § 52(28) EStG apply. We factor the tax consequences into every contract review.
Older contracts concluded before 1 January 2005
For pension insurance with a capital option concluded before 1 January 2005, § 20(1) no. 6 EStG in the version in force on 31 December 2004 continues to apply where the capital payout is chosen. This is ordered by § 52(28) sentence 5 EStG.
The gain then remains tax free where the contract ran for at least twelve years and premiums were paid for at least five years. Cancellation before the twelve years are up does not meet this requirement, so the gain is taxed in the normal way.
We calculate both routes for you. The additional yield from unwinding then stands alongside the tax burden from cancellation.
Contracts from 2005 and the half-income method
For contracts from 2005, the difference between the payout and the sum of premiums paid is taxed. Under § 20(1) no. 6 sentence 2 EStG, only half of this gain is taxed where the contract lasted at least twelve years and the benefit is paid after you turn 60.
For contracts concluded after 31 December 2011, § 52(28) sentence 7 EStG moves this age limit to 62. If you cancel before the twelve years are up, you lose the half-income method.
Alternatives to cancelling your private pension policy
Besides cancellation, you can make the policy paid-up under § 165 VVG, sell it on the secondary market, or, for older policy-model contracts, raise an objection. Which route yields the higher amount depends on the remaining term, the surrender value and taxation. We work through the options for your contract.
Making the policy paid-up instead of cancelling
Under § 165(1) VVG you can at any time, to the end of the current insurance period, request conversion into a premium-free policy. The contract continues; the benefit falls to the amount achievable without further premiums.
This requires the agreed minimum insured benefit. Where it is not reached, the insurer pays out the surrender value under § 169 VVG in accordance with § 165(1) sentence 2 VVG, and the contract ends.
For contracts concluded before 1 January 2005, the twelve-year period continues to run because the contract remains in force. Where at least five years of premiums were paid beforehand, tax exemption under § 20(1) no. 6 EStG in the version in force on 31 December 2004 remains achievable.
Selling on the secondary market
On a sale to the secondary market, a buyer takes over your contract along with the obligation to pay premiums and receives the insurance benefit at maturity. The contract does not end, so the surrender value under § 169 VVG and any deduction under § 169(5) VVG do not come into play.
Whether a buyer takes over your policy depends on their offer. We compare that offer with the surrender value and unwinding before you cancel.
Further information
These topics may also be of interest:
This information does not constitute legal advice in an individual case.
