Cancelling a company pension scheme
Cancelling your workplace pension scheme – direct insurance, pension fund & pension scheme in Augsburg
You’d like to cancel your workplace pension scheme and access the capital you’ve saved – but in most cases, this isn’t possible. With direct insurance, pension funds and pension schemes, the employer is the policyholder, not you. As an employee, you generally do not have the right to terminate the scheme yourself. However, there are options: portability to a new employer, exemption from further contributions, a lump-sum settlement for very small accrued entitlements or – in certain cases – the ‘revocation option’. As specialist solicitors for insurance law in Augsburg, we will assess your rights and show you the best course of action.
Why you can’t simply cancel your occupational pension scheme
Under the Occupational Pensions Act (BetrAVG), there are five ways to set up a company pension scheme. The three most common insurance-based options are direct insurance, a pension fund and a pension scheme. In all three cases, the employer is the policyholder – they enter into the contract with the insurer, pay the contributions (even if these are financed through deferred compensation from your salary) and hold the contractual rights. As an employee, you are the insured person and the beneficiary, but not a contractual partner of the insurer. You therefore do not have your own right of termination.
Your options – what you can do as an employee
Even if you cannot terminate your contract, there are several ways to manage your occupational pension scheme – particularly if you change jobs or if the contract no longer suits your circumstances. In Augsburg, we can advise you on every option and ensure your rights are upheld vis-à-vis your employer.
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Pension Scheme Check
Check your options with your direct insurance provider, pension scheme or pension fund – portability, severance pay or cancellation.
The 'wild card' for cancelling workplace pension schemes
The right of withdrawal in occupational pension schemes is a special case that requires careful consideration. As the employer is the policyholder, the right of withdrawal generally lies with them – not with the employee. However, there are situations in which the right of withdrawal also applies to employees.
When the 'cancellation option' applies to employees
If the employee has assumed the status of policyholder – for example, in the case of private continuation of direct insurance under section 1b(5), first sentence, no. 1 of the Occupational Pensions Act (BetrAVG) – they are entitled to their own right of withdrawal. If the information on the right of withdrawal was incorrect at the time of assumption, the withdrawal may still be declared years later. Upon rescission, the employee is refunded the contributions they have paid themselves, plus interest on the principal. The entitlements accrued during the employer-funded phase remain unaffected.
Exemption from contributions and private continuation
Upon leaving the company, the occupational pension scheme is generally suspended. The pension entitlement accrued up to that point is retained – in the case of deferred compensation, it becomes immediately vested (Section 1b(5) of the Occupational Pensions Act). In the case of direct insurance policies, the employee may continue the policy privately at their own expense if the employer has granted an irrevocable right of subscription. Private continuation is then treated for tax purposes as a private life insurance policy – no longer under Section 3(63) of the Income Tax Act (EStG).
Taxes and social security contributions on occupational pension payouts
Payments from occupational pension schemes are subject to tax and social security contributions. This financial burden is often underestimated and should be taken into account in any decision.
Deferred taxation and double taxation
Benefits from occupational pension schemes subsidised under Section 3(63) of the Income Tax Act (EStG) are subject to full deferred taxation (Section 22(5) EStG). In addition, contributions to health and long-term care insurance are payable (Section 229(1), first sentence, No. 5 of the Social Security Code, Book V) – known as ‘double contribution’, because employees are exempt from social security contributions during the accumulation phase but pay the full health insurance contribution during the payout phase.
Tax-free allowance since 2020 – relief on health insurance contributions
Since 1 January 2020, an exemption has applied to statutory health insurance (Statutory Health Insurance Occupational Pension Exemption Act): occupational pensions up to one-twentieth of the monthly reference amount (2025: approx. €176) are exempt from contributions. Only the amount exceeding this threshold is subject to the full standard contribution rate (including the supplementary contribution). For small occupational pensions, this represents a significant financial relief. Long-term care insurance does not have a comparable exemption.
Frequently Asked Questions
Further information
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This information does not constitute legal advice in individual cases.
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