Occupational Pension Schemes

Voluntary participation

• Private sector employees; plans provided by employer, often based on collective agreement or company-level agreement between employer and works council. 
• Automatic enrolment of employees (without obligation to pay contributions themselves) if pension plan is not implemented by individual agreement. 

General finances

• Fully funded schemes financed by contribution payments and capital revenues.

Contribution rates

• Contributions are paid by employer according to agreed conditions; voluntary participation of employee is possible (in general up to the level of contributions of the employer).

State support & incentivising strategies

• Tax refunds and exemptions from social security contributions granted for contributions to occupational pension plans.

• Different types of pension plans can be implemented by employer; pension plans either implemented internally via the employer in the form of book reserves (direkte Leistungszusage) or externally in the form of contributions to a pension institution (Pensionskasse) or by concluding a collective insurance (betriebliche Kollektivversicherung) or life insurances in favour of the employees.
• Pension institutions monitored by the ‘Financial Market Authority’ (Finanzmarktaufsicht).
• Internal pension plans partly secured by the ‘Insolvency Remuneration Fund’ (Insolvenz-Entgelt-Fonds) in case of insolvency of employer.

• No minimum retirement age specified in law; employee entitled to occupational pension benefits according to agreed conditions; conditions are regulated in pension regulations at company or collective level.

Pension payments

• Monthly life-long annuity (or one-time lump sum payment under certain conditions).
• Dependent on payment commitment: often ‘defined benefit’ (DB) or ‘defined contribution’ (DC) with a guarantee of a minimum investment return (only for externally implemented plans).

Taxation and social security contributions

• Company pensions from employer contributions are subject to wage tax, those parts that were financed by the employee are tax-privileged or even tax-free.
• Pension payments are not subject to social security contributions.