Live better today – and rely on a snowball system in the future?

The subject of pensions is not easy, but it is enormously important for the future, no matter what stage of life you are currently in. Network-Karriere has asked the Munich lawyer Dr. Johannes Fiala and the pension specialist Dipl.-Math. Peter A. Schramm to prepare the most important facts: “Live today, save later” is often the motto when a pension insurance policy is to be sold for a one-off payment. Some insurers offer this to their customers because of an emergency situation, even if there is no longer a contractual legal claim to it after the start of retirement. On the other hand, the legal right to extraordinary termination for good cause can never be excluded, not even – as the government also states – in the case of a basic pension.


However, if you have a certain basic standard of living during active times, you can decide, when you have even more income, at which times you want to live better: you can use everything now for a better life or only the part that leaves so much for old age that you can roughly maintain the already reduced standard of living during your active working life. In the end, it is a question of deciding whether one wants to be satisfied with an egg in the morning on Sundays and for the next few days, or whether a fried chicken will be served again on Sunday noon.


Really live today and save later?

Those who, with their eyes open, accept even greater hardship at (older) age, when they experience it, may hope to win the lottery or a snowball system by then.

The early Christians gained weight mainly through the operation of such a snowball system: After all, it was the custom for Jewish widows to go to Jerusalem with money from their inheritance, where they then had the problem that they might live longer than the money was enough. So they joined the Christian churches and gave them the money so that everyone could benefit. This made it necessary to keep attracting new members. This was flanked by the fact that they should not worry about their future the next day like birds – there was always enough for today. And in addition by the fact that it is desirable to die as a martyr for one’s faith (after that it will only get better anyway), which one should show publicly in the context of winning new members.


Statutory pension transferable in full?

Legal claims which are not transferable are considered as unseizable, §§ 851, 857 ZPO. And legal claims that are not attachable are considered non-transferable, § 400 BGB. The Deutsche Rentenversicherung Bund (DRV) writes on the Internet about this in a legally incorrect manner:

“You can, however, decide whether your pension should be transferred to another person proportionally or even in full. This is called “assignment or transfer of pension.”


This is because assignments are only effectively possible as a transfer if the amount of the pension exceeds the tax-free amount in the table of attachments, i.e. EUR 1,079.99 for a single person since 01.07.2015, § 850 c ZPO. In the case of a maintenance obligation towards a (possibly former) spouse or a descendant, the amount increases to EUR 1,479.99.

A maximum of EUR 2,379.99 (corresponding to five dependants) is exempt from seizure. Anyone who is married with four women according to Islam and then has more than one child to look after does not, however, achieve a higher garnishment-free amount.

If the DRV pays the pension to a third party, the assignee, as a result of an assignment, an additional declaratory administrative act is required before the pension is (partially) paid out to a third party. This was decided by the Federal Social Court (BSG, judgement of 24.10.2013, Ref. B 13 R 31/12 R), so that the DRV might have to pay twice due to formal errors, § 53 II SGB I.

The annuity master right cannot be transferred even in the case of a life annuity – unless this has been expressly agreed. A further exception – also in the case of the statutory pension – is a division within the framework of the pension equalisation in the event of divorce.

However, future benefits are attachable, insofar as they are transferable, only according to the table of attachments.

A set-off also comes up against this limit, § 394 BGB.


Advance assignment of wages and pensions before insolvency?

As of July 1, 2014, the possibility of advance assignment of wages (as well as the pension as a wage replacement) was abolished and the corresponding provision of Section 114 of the German Insolvency Code (InsO) was deleted by the legislator. The offsetting of seizable income against an employer loan is no longer permitted after the opening of insolvency proceedings, § 94 InsO. However, anyone can make voluntary payments, then from his or her attachment-free income, without being challenged. The garnishable portion of income increases the insolvency estate, for example to cover the costs of proceedings and administrator and, if necessary, also for the creditors. This applies to the month of the opening of insolvency proceedings and to the three preceding months, § 88 InsO. Because of the insO administrator’s recovery possibilities in this respect, collection companies park such funds in trust accounts for the time being. If the procedural costs are covered, the period of good conduct is reduced from six to five years, § 300 I No.3 InsO. If, in addition, 35 percent of the debt is paid off, the phase is shortened to three years. There is no residual debt discharge on creditors’ petition that is possible at any time up to the final date in the case of claims arising from intentional tort as well as fines, periodic penalty payments, administrative fines and penalties, maintenance arrears in breach of duty, convictions for tax offences in accordance with §§ 370, 373, 374 AO and interest-free loans to finance the costs of the insO proceedings.

However, the creditor must also register the claims in this way, section 174 II InsO.


Sale of the private pension insurance

The right to the private pension could be sold, completely, i.e. the original right. All that would then remain would be the ten-year premeditated challenge with regard to the transfer (section 133 InsO, section 3 AnfG) and the three-month block on sections 88, 130, 131 InsO. In the event of a (even partial, i.e. mixed) gift of the insurance, the disposal of the insurance contract or the payments would be contestable for four years, section 4 AnfG, section 134 InsO. In addition, there is the ten-year claim for reclaim due to (subsequent) impoverishment of the donor, § 528 BGB (German Civil Code), which can also be seized by the tax office. The social welfare office can also transfer such legal claims to itself. If you certainly do not want to choose a gift, you will have to ensure through an actuarial report that the benefit and consideration are equivalent.


Another possibility: Instead of the assignment, an irrevocable preferential treatment is chosen: A favours B for the private pension paid on A’s life. Beneficiaries may also be granted a preferential right of survival even if the pension is already running.


B pays an appropriate value, i.e. the subscription right is transferred for full consideration. If the benefit and consideration are actuarially equivalent in value, the InsO will regularly require you to wait only up to three months to see whether the seller of the policy has not been declared bankrupt by then. Hardly any investors have yet discovered the business of buying up existing private pensions. Life insurers often offer no surrender value at all or a relatively low one. This is precisely why the sale is worthwhile for both sides. Additional protection by means of a death insurance policy for the life of the insured person is advisable if the possible actuarially limited risk of termination of pension payments on death cannot be borne by spreading the risk over a large number of purchased pensions.


If a policy has been purchased by a “relative”, such as a member of the own family, the own company, or by friends, a two-year appeal is always possible, section 138 InsO. The burden of proof lies legally with the buyer, provided that he does not intervene with a trustee: However, an insolvency administrator can also easily expose such evasion. If, however, the purchaser only has knowledge of imminent insolvency or over-indebtedness based on relevant indications according to case law, it would be contestable for longer, § 133 InsO, § 3 AnfG. Insolvency occurs as soon as 90 percent of the debts due can no longer be paid immediately with liquid funds – i.e. if one would be dependent on deferral.

Normally this will remain hidden to the buyer of a pension insurance. Only such knowledge would nevertheless expose a so-called cash transaction, which is normally free of challenges (if within up to 30 days an equivalent payment is made directly into the assets of the seller, e.g. also through exemption from a liability) to challenges.


Limitation period in the event of refusal of benefits by the insurer

If the assignment is not recognised by the insurer (BoD), a three-year limitation period commences at the end of the year – as with any other rejection of benefits by the BoD – in order to take legal action against the BoD and, if necessary, to obtain insurance benefits with the help of the courts, Section 14 of the Insurance Contract Act.


If the proceeds of the sale are squandered or the buyer becomes insolvent?

If the sale of an annuity (RV) or endowment insurance policy (KLV) has been completed and the purchase price is then squandered and is no longer available to the creditors, the RV or KLV with policy cannot be reclaimed for this reason alone.

Often the CLV has already been assigned to a bank and the buyer of the CLV repay this liability and only pays the remaining purchase price. With regard to §§ 88, 130, 131 InsO, the buyer will want to pay after three months at the earliest, so as not to be surprised by a reclaim of the policy by the InsO administrator.

If however the LV buyer becomes insolvent, one will announce the open purchase price demand to the table without appropriate credit security opposite the buyer at most and hope for a quota. More often, however, it is the case that the buyer’s business model is unlawful and therefore all contracts are ultimately found to be null and void. The question will then always be, who in the end has made provisions in the contract to avoid bearing the insolvency risk of the contractual partner unnecessarily, but according to legal regulations.

Some buyers promise to continue the insurance or to invest the money allegedly more lucratively in order to pay the purchase price in instalments or years later in a single payment. Others give buyers, brokers and sellers a percentage share of later proceeds. As a rule, special official permits or approvals are required for such business models, which have regularly never been available from certain providers. Initiators and mediators then often receive unannounced home visits from BaFin or the criminal investigation department.


Early capital payment for company pension scheme

Employer and employee can jointly cancel and settle a commitment to an occupational pension or other company pension scheme at any time, even long after the start of retirement. This is only excluded if it is in chronological connection with the termination of the employment relationship, Section 3 of the German Works Council Constitution Act (BetrAVG). Then the employer also runs the risk of having to pay twice, because such a severance agreement is ineffective. Out of care and consideration, the employer is even obliged, at the request of the (possibly also former) employee, to participate in the dissolution and settlement of the pension scheme in old age if there are corresponding social or economic reasons for the employee to do so. For the employee, the severance payment also has an advantage in any case if he or she has to fear the insolvency of the employer, and then often only a fraction of what was promised when the pension commitment was made is paid.



By Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm



with friendly permission of


published in issue 05/2016, page 28-29

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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