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Is a company pension worth it in Germany?

In short

Is a company pension worth it in Germany? Usually yes, if your employer adds at least the mandatory 15 percent and the contract is cheap. Then 100 euros of contribution often cost you only 50 to 60 euros net. In retirement you pay income tax and, in statutory health insurance, about 20 percent health and care contributions. Close to retirement or with an expensive contract it often does not pay.

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What it costs

German figures for company pensions in 2026, the same nationwide.

Example	Typical range
Tax free maximum, 8 percent of the contribution ceiling	8,112 euros a year, 676 euros a month
Free of tax and social charges, 4 percent	4,056 euros a year, 338 euros a month
Mandatory top up on 200 euros converted	30 euros a month
Health insurance allowance on the company pension	197.75 euros a month
Health and care contribution above the allowance	about 21 to 22 percent

Limits and rates as of 2026 by law and the official figures.

The net saving in the example is a guide value from our quoting practice and depends on tax class, children and health insurer.

This is an orientation, not tax advice.

Worked example

4,000 euros gross, tax class I, converting 200 euros

What the contribution really costs you and what goes into the contract.

Gross pay converted	200 euros a month
Social charges saved, your share about 21 percent	about 42 euros
Income tax saved	about 55 to 60 euros
Your net cost	about 100 to 105 euros
Mandatory employer top up, 15 percent	30 euros
Into the contract	230 euros a month

For about 100 euros net, 230 euros go into the contract. In retirement about 30 to 45 percent of the pension go on tax, health and care, depending on your tax rate. With a cheap contract you still come out ahead.

When it pays

The advantage comes while you save: you pay from gross pay, save tax and social charges, and your employer adds something. The drawback comes later: the pension is fully taxed, and members of statutory health insurance pay the full health and care contribution themselves.

Whether you end up ahead of a private savings plan depends on three things: how much your employer adds, how expensive the contract is and how high your tax rate is today compared with retirement.

The bigger the top up, the clearer the case. If your employer adds 20 to 50 percent, that usually outweighs the deductions in old age by a wide margin.

Your situation	Assessment
Employer adds 20 percent or more	almost always worth it
Only the mandatory 15 percent, cheap contract	usually worth it, but tight
Privately health insured	rather good, no health contribution on the pension later
Income above 69,750 euros a year	smaller saving, health and care contributions are capped anyway
Less than ten years to retirement	often tight, acquisition costs weigh heavily
Planning to leave Germany for good	claim stays, but check tax on payment abroad

What is deducted in retirement

A company pension from salary conversion is fully subject to income tax. How much tax you pay depends on your other income in old age.

Members of the statutory health insurance for pensioners pay the full contribution on a company pension, employee and employer share. At 14.6 percent plus an average 2.9 percent additional contribution that is about 17.5 percent. In 2026 the first 197.75 euros a month are exempt.

For long term care this amount is only a threshold: if the company pension is higher, the whole pension is charged, at 3.6 percent, without children 4.2 percent.

When it does not pay

If the contract has high acquisition and admin costs and your employer only pays the mandatory 15 percent, a cheap private savings plan can come out ahead. Ask for the costs in euros.

If you only have a few years until retirement, acquisition costs eat a large part of the advantage.

If you are likely to need basic income support in old age, the company pension is partly counted against it.

If you soon become self employed or will be without pay for a long time, the contract rests. Costs often continue.

What the 2026 reform changes

The second Betriebsrentenstärkungsgesetz was passed in December 2025 and applies since 22 January 2026. Companies without a collective agreement may now enrol staff automatically with an opt out, but must then add at least 20 percent.

Since 1 July 2026 you can restart a Direktversicherung on the old terms within three months after a period without pay, such as parental leave. From 1 January 2027 the subsidy for low earners rises to a maximum of 360 euros a year.

Unchanged: the 4 and 8 percent limits, the 15 percent top up and the full health contribution on the pension in old age.

Step by step

Ask your employer how much he adds and which contract is offered.
Get the contract costs in euros and the guaranteed pension in writing.
Check your net cost with a German gross to net calculator.
Roughly deduct tax and health contributions in retirement.
Compare with a private savings plan of the same amount.
Only then fix the amount, at most 338 euros a month free of social charges.

Checklist

Employer top up in writing, at least 15 percent
Contract costs known in euros
Tax and health contributions in retirement included
At least ten years to retirement
Clear what happens on a job change or parental leave
Cover for your family checked

Common mistakes

Looking only at today's tax saving and forgetting deductions in old age
Signing without comparing costs because the employer offers it
Converting more than 338 euros and being surprised by full social charges on the rest
Not planning for the slightly lower state pension

Questions and answers

Frequently asked

Is the company pension charged twice for health insurance?

Partly. While saving you avoid contributions up to 338 euros a month, in retirement you pay the full contribution on the pension above the allowance.

Must my employer add a top up?

Yes, 15 percent for Direktversicherung, Pensionskasse and Pensionsfonds, as far as he saves social charges. A collective agreement can differ.

Is it worth it for low earners?

Often yes, if the employer uses the low earner subsidy. You pay nothing yourself, and the employer gets 30 percent back from the state.

How much lower will my state pension be?

Not much. Converting 200 euros a month for one year costs roughly 2 euros of monthly state pension. This is a guide value.

What if I am privately health insured?

Then no health contribution is due on the company pension in retirement. While saving you only save pension and unemployment insurance.

I may not stay in Germany. Should I still sign?

If your employer adds a good top up, often yes, the claim stays yours abroad. Check how your new country of residence taxes a German company pension.

Sources

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