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What does Germany's second Company Pensions Strengthening Act change from 2027?

In short

What does Germany's second Company Pensions Strengthening Act change from 2027? From 1 January 2027 the subsidy for low earners rises to up to EUR 360 a year, and the pay limit for it grows with the contribution ceiling, probably to EUR 3,186 a month in 2027 instead of EUR 2,575. You can also draw your company pension next to a partial state pension. Much else has applied since January and July 2026.

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What it costs

The key figures from the act, old and new.

Example	Typical range
Low-earner subsidy, maximum	EUR 288 until 2026, EUR 360 a year from 2027
Employer contribution that qualifies, maximum	EUR 960 until 2026, EUR 1,200 a year from 2027
Pay limit for the subsidy	EUR 2,575 until 2026, probably EUR 3,186 a month in 2027
Cash-out without consent, capital in 2026	up to EUR 7,119, previously EUR 4,746
Top-up for auto-enrolment without a collective agreement	at least 20 percent of the converted amount

Figures from the text of the act, reference value 2026 EUR 3,955.

The 2027 pay limit is based on the cabinet decision of October 2026 setting the contribution

ceiling at EUR 106,200 a year; the Bundesrat still has to approve it.

The old cash-out limits are our own calculation.

Worked example

Shop assistant, EUR 2,900 gross, employer pays an extra EUR 100 a month in 2027

How the new pay limit works when the employer pays in extra from 2027.

Pay in 2026, limit EUR 2,575	no subsidy
Pay in 2027, limit probably EUR 3,186	subsidised
Employer contribution per year	EUR 1,200
Subsidy, 30 percent via payroll tax	EUR 360
Cost to the employer	EUR 840

The shop assistant gets EUR 1,200 a year into her company pension without converting any salary. The employer bears only EUR 840 of it. In 2026 it would have received no subsidy for her.

Three start dates, not one

The second Company Pensions Strengthening Act of 16 January 2026 was published in the Federal Law Gazette 2026 Part I No. 14. Many guides give only one date, but the act has three. Article 18 brings most of it into force the day after publication, 22 January 2026. The changes to the Insurance Contract Act (VVG) apply from 1 July 2026. Only on 1 January 2027 do the higher low-earner subsidy and the company pension next to a partial pension follow.

For employees, what changes from 2027 matters mainly for lower incomes and for anyone planning a gradual move into retirement. The other rules can be used today.

Change	Applies from	Who it affects
Automatic salary conversion without a collective agreement, with at least 20 percent employer top-up	22 January 2026	employers not covered by a relevant collective agreement, and their staff
Higher limits for cashing out small entitlements	22 January 2026	job changers with small company pensions
Social partner models open to more employers	22 January 2026	employers and staff, if the unions and employer associations agree
Restart a Direktversicherung after unpaid leave on the old terms	1 July 2026	parents, carers, people on long sick leave
Subsidy up to EUR 360 and a pay limit that rises each year	1 January 2027	low earners and their employers
Company pension next to a partial pension	1 January 2027	anyone retiring gradually

From 2027: more support for low earners

If an employer pays extra into a company pension (betriebliche Altersversorgung) for low-paid staff, it gets 30 percent back through payroll tax. From 2027, up to EUR 1,200 a year of employer contributions qualify instead of EUR 960, so the subsidy rises from at most EUR 288 to EUR 360.

The new pay limit matters more. Until 2026 it was fixed at EUR 2,575 gross a month. From 2027 it is 3 percent of the annual contribution ceiling of the statutory pension insurance. Based on the figures the federal cabinet adopted in October 2026, that would be EUR 3,186 a month in 2027; the Bundesrat still has to agree. Many more full-time employees will qualify.

From 2027: company pension next to a partial pension

Until now you could only demand early payment of a company pension if you drew the statutory old-age pension in full (Vollrente). From 2027, any old-age pension is enough, including a partial pension (Teilrente). If you cut your hours and take a partial pension, you can add the company pension.

Check whether your contract reduces the pension for early drawing. And remember that health and care contributions are due on the company pension next to a partial pension too.

Since 2026: auto-enrolment without a collective agreement

Employers whose wages are not set by a relevant collective agreement may, since 22 January 2026, enrol all staff automatically in salary conversion (Entgeltumwandlung) through a works agreement, with a right to opt out. The condition: the employer adds at least 20 percent of the converted amount instead of the usual 15 percent.

In practice, if your employer introduces such a scheme, part of your salary is converted unless you object. You can opt out, but you then also give up the employer top-up.

Since 2026: small cash-outs and parental leave

Since 22 January 2026, an employer may cash out a small entitlement without your consent when you leave if the later pension would be at most 1.5 percent of the reference value, EUR 59.33 a month in 2026, or EUR 7,119 as capital. With your consent the limit is 2 percent, EUR 79.10 in 2026, if the money goes straight into the statutory pension insurance. That payment stays tax-free.

Since 1 July 2026, you can restart a Direktversicherung funded by salary conversion within three months after a period without pay, such as parental leave, on the old terms. The insurer must tell you about this right. It applies to policies made premium-free after 30 June 2026.

What does not change

The limits for salary conversion stay the same: 8 percent of the contribution ceiling tax-free, of which 4 percent free of social contributions, up to EUR 338 a month in 2026. The 15 percent employer top-up and full health and care contributions on the pension in retirement are also unchanged.

The act does not lower health insurance contributions on company pensions. If you were waiting for that before signing up, there is nothing in this law for you.

Step by step

Check whether your gross pay in 2027 is below the new limit.
Ask your employer about the subsidy of up to EUR 360.
If auto-enrolment is introduced, check that the top-up is at least 20 percent.
Before parental leave, clarify how your Direktversicherung continues afterwards.
If you plan a partial pension from 2027, ask about early drawing of the company pension.
When changing jobs, compare a cash-out offer with transferring the pension.

Checklist

Pay compared with the 2027 limit
Subsidy raised with the employer
Opt-out deadline for auto-enrolment noted
Three-month restart window after parental leave in the calendar
Reductions for drawing next to a partial pension checked

Common mistakes

Expecting every change only in 2027
Believing the act lowers health contributions on company pensions
Opting out of auto-enrolment without counting the employer top-up
Missing the three-month window after parental leave
Accepting a small cash-out without checking the payment into the statutory pension

Questions and answers

Frequently asked

When did the act come into force?

Most parts on 22 January 2026, the Insurance Contract Act changes on 1 July 2026,

the subsidy and partial pension rules on 1 January 2027.

Do I as an employee get the EUR 360?

No, your employer gets it back through payroll tax.

You benefit because extra contributions for you cost the employer less.

Does my employer have to use the subsidy?

No, it is voluntary.

It is still worth asking, as many employers do not yet know the new pay limit.

Does the tax-free maximum rise?

No, it stays at 8 percent of the contribution ceiling,

of which 4 percent is free of social contributions.

Sources

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