What does a pension insurance without a lump sum option mean?
In short
A pension insurance without a lump sum option (ohne Kapitalwahlrecht) pays your savings only as a lifelong pension. You cannot take the money in one go when the pension starts. What does that mean for you? Less flexibility, but protection from creditors of up to EUR 340,000 under section 851c of the Code of Civil Procedure, and tax only on the income share: 17 percent of the pension from age 67.
These figures are set by German law and apply to every provider.
Example
Typical range
Income share, pension starting at 60
22 percent of the pension taxable
Income share, pension starting at 65
18 percent of the pension taxable
Income share, pension starting at 67
17 percent of the pension taxable
Protected saving, ages 28 to 67
up to EUR 7,000 a year
Protected capital in total
up to EUR 340,000
Maximum guaranteed interest for new contracts
1 percent
As of October 2026.
The amounts in section 851c ZPO are first adjusted on 1 July 2027.
The worked example is a guide value from advisory practice;
your actual pension depends on your tariff's annuity factor.
Worked example
Self-employed, 67, pension of EUR 600 a month
How the income share works for a private pension insurance without a lump sum option starting at 67.
Annual pension
EUR 7,200
Income share at 67
17 percent
Taxable part
EUR 1,224 a year
Tax at a 25 percent rate
about EUR 306 a year
Of EUR 7,200 pension about EUR 6,900 remain after tax. The percentage does not change for life.
What the lump sum option is
Most German private pension policies let you decide shortly before the pension starts: lifelong monthly pension or the whole capital at once. That choice is the Kapitalwahlrecht. A pension insurance without it does not allow the choice. The money comes back only as a pension, month by month, for life.
Some contracts still allow small exceptions. With a Rürup pension, up to twelve monthly payments may be combined and a very small pension may be paid out. What happens if you die before the pension starts depends on your contract: with a premium refund (Beitragsrückgewähr) your survivors receive money, without it often nothing.
Feature
with lump sum option
without lump sum option
Payout
pension or lump sum
pension only
Tax on pension payments
income share
income share
Tax on a lump sum
half the gain after 12 years and from 62
no lump sum
Creditor protection under section 851c ZPO
not possible
possible if all conditions are met
Flexibility in old age
high
low
Where you find these contracts
The Rürup pension, also called Basisrente, never has a lump sum option. The Income Tax Act requires a lifelong monthly pension starting no earlier than 62, and the claims may not be inheritable, transferable, pledged, sold or capitalised. In return you can deduct contributions from your taxable income while saving.
There are also private pension policies that deliberately exclude the lump sum option, often for self-employed people who want to protect their savings from creditors. In many other tariffs the option is standard and cannot be removed.
The advantage: protection from creditors
Under section 851c ZPO a pension may only be seized like earned income if four conditions are met: lifelong payment not before age 60, no right to dispose of the claims, no third party beneficiaries except survivors, and no lump sum except on death. A policy with a lump sum option fails the last condition.
Saving is then protected too: up to EUR 6,000 a year from 18 to 27 and up to EUR 7,000 a year from 28 to 67, in total up to EUR 340,000. For the protection to work, surrender must be irrevocably excluded under section 168(3) of the Insurance Contract Act. For self-employed people with liability risks, that is a real argument.
How the pension is taxed
For a private pension insurance without a lump sum option that is not a Rürup contract, only the income share is taxed. It depends on your age when the pension starts and stays the same for life: 22 percent at 60, 18 percent at 65, 17 percent at 67.
If you surrender such a contract before the pension starts, the gain is taxed under section 20 of the Income Tax Act like an endowment policy. A Rürup contract cannot be surrendered for cash at all; you can only make it paid up.
What a pension insurance without a lump sum option means at the job centre
For Grundsicherungsgeld, called Bürgergeld until 30 June 2026, insurance contracts meant for retirement are not counted as assets. A contract that pays only a lifelong pension shows that purpose very clearly. The Federal Employment Agency names Rürup contracts and private pension insurance as examples.
When a contract with a lump sum option suits you better
If you do not know whether you will need money in old age for a loan, a renovation or your family, a contract without the option takes that choice away. People in poor health often get back less from a lifelong pension than they paid in.
You do not need to give up the option if you have no creditor risk and want to stay flexible. Then keep the Kapitalwahlrecht and decide shortly before the pension starts; our page on pension or lump sum walks through that choice.
Step by step
Check the policy terms for a lump sum option.
Check whether a premium refund or guaranteed pension period applies on death.
If you want creditor protection, confirm all four conditions of section 851c ZPO with the insurer.
Ask for the guaranteed annuity factor, not only the figure including bonuses.
Compare with a contract that keeps the lump sum option before you commit.
Checklist
Lump sum option excluded or included
Death benefit before the pension start agreed
Guaranteed pension period for the family considered
Exclusion of surrender under section 168 VVG if creditor protection is wanted
Guaranteed annuity factor known
Common mistakes
Taking a contract without the option although a loan must be repaid in old age
Assuming every pension insurance is automatically safe from creditors
Not checking the death benefit before the pension starts
Mixing up the tax rules of Rürup and private pensions
Questions and answers
Frequently asked
Can I add the lump sum option later?
Never for a Rürup pension, the law forbids it.
For private contracts only with the insurer's consent,
and then the creditor protection under section 851c ZPO is lost.
What happens if I die before the pension starts?
That depends on your contract.
With a premium refund your survivors get money back, without it often nothing.
Is the Rürup pension a pension insurance without a lump sum option?
Yes.
The Income Tax Act bans capitalisation.
Only small pensions may be paid out and up to twelve monthly payments combined.
Is my pension then safe from creditors?
Only if all conditions of section 851c ZPO are met.
Then the pension can only be seized like earned income, above the exemption limits.
Can I cancel such a contract?
A private policy usually yes, with tax on the gain.
If surrender is excluded under section 168(3) VVG, you can only make it paid up.
