Company Pension Payout When Emigrating: What Happens to Your German Occupational Pension

Published on 15.10.2026

Company Pension Payout When Emigrating

Anyone who leaves Germany permanently often assumes that their occupational pension entitlements (betriebliche Altersversorgung, bAV) simply move with them. Legally, however, the payout of a German company pension when emigrating depends on several decisions that are made before the move: Is the entitlement preserved when the employment relationship ends? Can the accumulated capital be paid out before moving away? Can the contract be taken to a new employer? And who taxes the later pension if the place of residence is abroad? This article explains the German rules from the Occupational Pensions Act (Betriebsrentengesetz, BetrAVG), the Income Tax Act (Einkommensteuergesetz, EStG) and Book V of the Social Code (Sozialgesetzbuch V, SGB V) for emigrants. The statutory pension is covered in a separate article on Pension insurance when emigrating; this article deals exclusively with the occupational pension.

The Five Implementation Methods: Why the Method Determines the Consequences

Occupational retirement provision is not a uniform product. The BetrAVG recognises five implementation methods (Durchführungswege), and almost every legal consequence of moving abroad depends on which one was chosen in the individual case. Looking at the pension commitment or the insurance policy is therefore the first step.

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For tax purposes, the direct commitment and the support fund are subsequent wages, while the three insurance-based methods give rise to other income (sonstige Einkünfte). This distinction later affects the tax deduction, limited tax liability and the application of tax treaties.

Is the Entitlement Preserved? Vesting under Section 1b BetrAVG

In most cases, emigration also ends the German employment relationship. Whether the entitlement earned up to that point is preserved is governed by Section 1b BetrAVG. The employee’s place of residence plays no role: the only decisive factor is whether the statutory periods have been met.

Employer-Funded Commitments

Under Section 1b (1) sentence 1 BetrAVG, the entitlement is preserved if the employment relationship ends before the pension event occurs but after the employee has reached the age of 21, and the pension commitment had existed for at least three years at that time. Anyone who resigns shortly after being granted an employer-funded commitment in order to emigrate can therefore lose the entitlement. The timing of the resignation therefore belongs in the planning of the move. More favourable contractual rules by the employer are possible and should be checked in the commitment.

Deferred Compensation

Deferred compensation (Entgeltumwandlung) is different: to the extent that the pension derives from converted salary, including any employer subsidy under Section 1a (1a) BetrAVG, the employee retains the entitlement under Section 1b (5) BetrAVG even if the employment relationship ends before the pension event. No minimum period applies here.

What “Vested” Does Not Mean

Vested does not mean available. The entitlement remains in place until the agreed start of benefits, usually until the retirement age set in the commitment. The law does not provide for a payout solely because of moving abroad; the amount of the preserved entitlement is determined by Section 2 BetrAVG.

Early Payout before Moving Away: The Prohibition on Settlement in Section 3 BetrAVG

The most common wish of emigrants is to have the company pension “paid out” before the move. The law generally stands in the way. Under Section 3 (1) BetrAVG, vested entitlements on termination of the employment relationship and current benefits may only be settled under the conditions of the following subsections. According to the prevailing view, an agreement outside these exceptions is invalid; a settlement paid nevertheless cannot, in case of doubt, extinguish the entitlement.

Very Small Entitlements (Section 3 (2) BetrAVG)

The employer may settle an entitlement without the employee’s consent if the later monthly pension on reaching the intended retirement age would not exceed 1.5 percent of the monthly reference value (Bezugsgröße) under Section 18 SGB IV; for lump-sum benefits, a limit of 18 tenths of the monthly reference value applies. The reference value is set anew each year, so the limit changes accordingly.

For emigrants within the European Union, Section 3 (2) sentence 3 BetrAVG contains an important protective rule: if, after the end of the employment relationship, the employee takes up a new employment relationship in another EU member state and informs their former employer of this within three months, the settlement of a very small entitlement also requires their consent. Anyone who fails to give this notice loses their say in this respect. If the employee exercises their right to transfer, settlement is not permitted under Section 3 (2) sentence 4 BetrAVG.

Settlement in Favour of the Statutory Pension (Section 3 (2a) BetrAVG)

Under the current version of the Act, the employer may, with the employee’s consent, settle an entitlement up to a higher limit (2 percent of the monthly reference value, 24 tenths for lump-sum benefits) if the settlement amount is used directly as a contribution to the statutory pension insurance. This does not produce cash for the move; the capital goes into the statutory pension.

Refund of Pension Insurance Contributions (Section 3 (3) BetrAVG)

The actual “emigrant clause” is found in Section 3 (3) BetrAVG: the entitlement must be settled at the employee’s request if their contributions to the statutory pension insurance have been refunded. Here the employee therefore has an entitlement, and the employer has no discretion.

The hurdle lies in the preceding refund of contributions. Under Section 210 (1) no. 1 SGB VI, contributions are refunded on application to insured persons who are not subject to compulsory insurance and do not have the right to voluntary insurance; in addition, under Section 210 (2) SGB VI, 24 calendar months must have elapsed since leaving compulsory insurance. However, under Section 7 (1) sentence 2 SGB VI, German nationals can insure themselves voluntarily even if their habitual abode is abroad. For them, this ground for a refund is therefore generally ruled out. In practice, Section 3 (3) BetrAVG is mainly relevant for foreign nationals who move to a state outside European social security coordination law and without a social security agreement.

Cancelling Direct Insurance and Taking the Surrender Value?

The law also restricts the cancellation of direct insurance after leaving. If the contract is transferred to the employee after leaving (the so-called insurance contract solution under Section 2 (2) sentence 2 BetrAVG), the former employee may, under Section 2 (2) sentences 4 to 6 BetrAVG, neither assign nor borrow against the claims in the amount of the actuarial reserve formed from employer contributions. In this amount, the surrender value cannot be claimed after cancellation; instead, the contract is converted into paid-up insurance. The same applies to Pensionskassen under Section 2 (3) BetrAVG. Anyone counting on liquidity from cancelling before the move is often surprised here.

Taking the Entitlement with You: Portability under Section 4 BetrAVG and Its Limits

Instead of leaving the entitlement dormant, it may under certain circumstances be transferred to a new employer.

• Transfer by agreement (Section 4 (2) BetrAVG): By agreement between the old employer, the new employer and the employee, the new employer may take over the commitment or accept the transfer value in return for a commitment of equal value.
• Right to transfer (Section 4 (3) BetrAVG): Within one year of the end of the employment relationship, the employee may demand that the transfer value be transferred to the new employer or its pension institution if the pension was provided via a Pensionsfonds, Pensionskasse or direct insurance and the transfer value does not exceed the contribution assessment ceiling of the general pension insurance. The new employer must then in turn provide the pension via one of these three methods.
• Legal consequence (Section 4 (6) BetrAVG): Upon complete transfer, the former employer’s commitment lapses.

For tax purposes, the transfer value is tax-free under Section 3 no. 55 EStG if the pension is provided by both the old and the new employer via a Pensionsfonds, a Pensionskasse or a life insurance company.

For emigrants, portability is narrow: the law is tailored to a new employer that grants a commitment via one of the methods mentioned. Whether a foreign employer or a foreign pension institution can be the target of a transfer, and what the tax effect would be, is open in the individual case and should be clarified in advance. The often-cited EU Mobility Directive 2014/50/EU concerns the acquisition and preservation of supplementary pension rights; it does not give rise to a general right to transfer the entitlement into the pension system of another member state.

Payment Abroad: What Needs to Be Arranged in Practice

Once the pension event has occurred, the pension provider also pays recipients resident abroad; the BetrAVG does not exclude payment abroad. In practice, the following must be organised:

• Address and bank details: Notify the new address and account in good time. Outside the SEPA area, fees and exchange rates can reduce the amount paid; some retirees therefore keep a German account.
• Life certificate: Many pension providers require one regularly and otherwise withhold payments until the matter is clarified.
• Tax documentation: The German tax identification number remains in place. For treaty benefits, a certificate of tax residence from the new state of residence is often needed.
• Pension or lump sum: Whether there is a lump-sum option and by when it must be exercised is determined solely by the commitment or the contract. The choice has consequences for tax and social security contributions.

Taxation of the Company Pension after Moving Away

Unlimited or Limited Tax Liability

As long as there is a residence or habitual abode in Germany, unlimited tax liability continues. Anyone who keeps a home in Germany should know the distinction described in the article on Habitual abode in tax law. After moving away completely, company pensions are subject to limited tax liability (beschränkte Steuerpflicht) to the extent that they are domestic income within the meaning of Section 49 EStG:

• Direct commitment and support fund: Pension payments are income from employment. Under Section 49 (1) no. 4 (a) EStG they are domestic if the work is or was performed or exploited in Germany. This covers retirement pensions for former work in Germany. For payments from German public funds, letter (b) applies.
• Direct insurance, Pensionskasse, Pensionsfonds: Benefits within the meaning of Section 22 no. 5 EStG are domestic income under Section 49 (1) no. 10 EStG.

How the benefit is taxed under Section 22 no. 5 EStG depends on whether the contributions in the accumulation phase were tax-free or subsidised. If the benefits are based on tax-free contributions (in particular under Section 3 no. 63 EStG), they are generally fully taxable; to the extent that they are based on non-subsidised contributions, a graduated taxation applies under Section 22 no. 5 sentence 2 EStG, for example with the income portion (Ertragsanteil) for life annuities. For older contracts with contributions taxed at a flat rate, the result may differ; the pension provider’s benefit statement breaks down the portions. If the pension was subsidised with retirement savings allowances (Altersvorsorgezulagen), the Riester rules also apply, which are covered in the article on Riester pension and repayment when emigrating.

Persons with limited tax liability are placed at a disadvantage under Section 50 (1) EStG: the basic tax-free allowance (Grundfreibetrag) generally has no effect for them; for employment income under Section 49 (1) no. 4 EStG, Section 50 (1) sentence 2 EStG contains a special rule. Numerous deductions, for example for extraordinary burdens, are excluded. Under the conditions of Section 1 (3) EStG, treatment as subject to unlimited tax liability may be available on application if at least 90 percent of the income in the calendar year is subject to German income tax or the other income does not exceed the basic tax-free allowance.

Tax Deduction and Jurisdiction

For direct commitments and support funds, the employer or the fund withholds wage tax (Lohnsteuer). If a double taxation agreement allocates the right to tax to the state of residence, the wage tax deduction is not stopped automatically: as a wage tax deduction criterion, Section 39 (4) no. 5 EStG provides for notification that the wages are to be exempt from wage tax under an agreement, if the employee or employer applies for this. Without this application, tax continues to be deducted for the time being.

For persons with limited tax liability who are to be assessed exclusively on income under Section 49 (1) nos. 7 and 10 EStG, for example with the statutory pension and benefits from direct insurance, a Pensionskasse or a Pensionsfonds, the Neubrandenburg tax office (Finanzamt Neubrandenburg) is responsible under Section 1 EStZustV in conjunction with Section 19 (6) AO. If pension payments from a direct commitment or support fund are added, this central jurisdiction does not apply; which tax office is then responsible must be clarified in the individual case.

Double Taxation Agreements

Whether Germany may actually tax the company pension after the move is determined by the relevant double taxation agreement (Doppelbesteuerungsabkommen). Under the OECD Model Tax Convention, pensions from former private sector employment are generally taxed in the state of residence; pensions from public funds, by contrast, are often reserved to the paying state. Many German agreements deviate from the model, for example through source state taxing rights for certain pensions, special rules for lump-sum settlements or subject-to-tax clauses. The basic mechanics are explained in the article on the Basics of double taxation agreements when emigrating. How the new state of residence itself taxes the benefit is a question of foreign law; a local adviser should be consulted on this.

Particularly in the case of large lump-sum payouts or an unclear position under the agreement, it makes sense to apply in advance for a binding ruling (verbindliche Auskunft) from the tax office under Section 89 (2) AO and, if the other state has a comparable procedure, to obtain a ruling there as well. How a lump-sum benefit is to be classified under the agreement often remains open in the individual case.

Health and Long-Term Care Insurance Contributions on the Company Pension

In addition to tax, contributions to statutory health and long-term care insurance may be payable. Under Section 229 (1) sentence 1 no. 5 SGB V, occupational pensions are pension payments (Versorgungsbezüge). Excluded, among others, are benefits that the insured person acquired after the end of the employment relationship as sole policyholder from contributions not funded by the employer. If a lump sum is paid instead of a pension, one hundred-and-twentieth is deemed to be the monthly payment under Section 229 (1) sentence 3 SGB V, for a maximum of 120 months. The contribution liability is therefore spread over ten years.

For health insurance, Section 226 (2) SGB V provides for a threshold of one twentieth of the monthly reference value; if it is exceeded, an allowance of this amount is deducted for company pensions. The paying agent withholds the contributions under Section 256 SGB V and pays them to the health insurance fund.

The decisive factor for emigrants is membership: if someone remains a member of the health insurance for pensioners (Krankenversicherung der Rentner, KVdR), for example when retiring to an EU or EEA state, contributions on pension payments continue. If German membership ends, for example when moving to a third country, the contribution liability linked to it generally also lapses. Details on continuation are covered in the articles on KVdR when retiring abroad and on Cancelling German statutory health insurance when emigrating.

Typical Mistakes When Moving Away

1. Resigning at the wrong time: An employer-funded commitment that has not yet existed for three years may lapse on leaving (Section 1b (1) BetrAVG).
2. Informal settlement agreements: Settlements outside Section 3 BetrAVG are problematic and cannot effectively extinguish the entitlement.
3. Wage tax deduction despite an agreement: Without an application under Section 39 (4) no. 5 EStG, the paying agent continues to deduct wage tax; the refund must then be pursued afterwards.
4. Choosing a lump sum without an overall calculation: Exercising a lump-sum option shortly before or after the move may have different tax and contribution effects than expected.

Example (fictitious): Tilo, 58, moves to a state outside the EU. His direct insurance from deferred compensation is preserved under Section 1b (5) BetrAVG. His employer-funded direct commitment has only existed for two years and is not statutorily vested if he leaves immediately; a later resignation date can make the difference here.

Checklist before Moving Away

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Conclusion

Emigration initially changes little about the occupational pension: vested entitlements are preserved, and payment abroad is possible. However, the prohibition on settlement only allows an early payout in narrow cases, a transfer to a foreign employer is not mapped out by law, and taxation depends on the implementation method, limited tax liability and the relevant agreement. In addition, health and long-term care insurance contributions apply as long as German membership exists. Anyone who sorts out the resignation date, deadlines and tax deduction before the move and obtains a binding ruling where the position is unclear avoids most disadvantages.

Frequently Asked Questions

Can I have my company pension paid out before emigrating?

Only in the cases under Section 3 BetrAVG. The employer may settle very small entitlements without consent. The employee has an entitlement mainly if their contributions to the statutory pension insurance have been refunded, which is generally ruled out for German nationals.

Will the company pension also be transferred abroad?

Yes, the Occupational Pensions Act does not exclude payment abroad. However, pension providers usually require up-to-date account details and regular life certificates; outside the SEPA area, fees and exchange rate losses may arise.

Where is my company pension taxed after I move away?

Germany treats the benefit as domestic income under Section 49 (1) no. 4 or no. 10 EStG. Whether Germany may actually tax it is governed by the double taxation agreement with the new state of residence; the right to tax often lies there, but exceptions are common.

Do I have to continue paying health insurance contributions on the company pension abroad?

Only as long as you remain a member of German statutory health insurance, for example as a KVdR member resident in the EU. Contributions on pension payments under Section 229 SGB V will then continue to be withheld, spread over up to 120 months for lump-sum benefits.

Can I take my company pension to an employer abroad?

The statutory right to transfer under Section 4 (3) BetrAVG requires a new employer that provides the pension via a Pensionsfonds, Pensionskasse or direct insurance. Whether a transfer abroad is possible in the individual case, and what its tax effect would be, should be clarified in advance.

Attorney Dr. Johannes Fiala and the Munich-based firm, which focuses on international succession law, tax law and asset protection, advise emigrants and retirees on occupational pension issues in connection with moving abroad, from vesting and settlement to the transfer of the entitlement and the taxation of the payout abroad. Dr. Fiala has published extensively on questions of emigration and asset protection. Please get in touch with the firm without obligation to discuss your individual situation in an initial consultation.