With salary sacrifice (Entgeltumwandlung), part of your gross pay goes straight into an occupational pension (betriebliche Altersversorgung). Taxes and social insurance contributions fall only within fixed limits. This guide shows the 2026 limits, a worked example for social insurance and which parts you should check with the official tax calculator.
Short answer: Contributions from salary sacrifice are free of wage tax up to 8 percent of the pension contribution ceiling (Beitragsbemessungsgrenze) of the statutory pension insurance. They are free of social insurance contributions up to 4 percent. For 2026 this is 676 euros and 338 euros per month (ceiling 8,450 euros per month, status October 2026).
The most important points in brief
- Contributions up to 8 percent of the pension insurance ceiling are free of wage tax, which is 676 euros per month in 2026 (§ 3 no. 63 EStG).
- Contributions up to 4 percent are free of social insurance, which is 338 euros per month in 2026 (§ 1 SvEV).
- With an employee share of 21.15 percent of social insurance (2026, with a child, assumption), each converted euro within the limit saves about 21 cents in social insurance.
- Payments from the pension are taxed later (§ 22 no. 5 EStG). Pensions are also subject to health insurance contributions (§ 229 SGB V).
- How much wage tax you actually save depends on your personal tax rate and can be checked with the federal finance ministry’s tax calculator.
The limits for 2026 at a glance
Both limits refer to the contribution assessment ceiling (Beitragsbemessungsgrenze, BBG) of the general pension insurance. For 2026 it is 8,450 euros per month or 101,400 euros per year (German Pension Insurance, status 2026). The following values follow from this.
| Limit | Per month | Per year | Effect |
|---|---|---|---|
| Contribution ceiling of pension insurance 2026 | 8,450 euros | 101,400 euros | Starting value for both limits |
| 8 percent of the ceiling (free of wage tax) | 676 euros | 8,112 euros | § 3 no. 63 sentence 1 EStG |
| 4 percent of the ceiling (free of social insurance) | 338 euros | 4,056 euros | § 1 para. 1 sentence 1 no. 9 SvEV |
The values are rounded and show the upper limits. According to the wording of the SvEV, social insurance freedom applies only to amounts that remain free of wage tax or are taxed at a flat rate. Freedom from wage tax under § 3 no. 63 EStG is therefore the precondition for freedom from contributions.
Which contributions count at all?
Tax-privileged are contributions to direct insurance policies, pension funds (Pensionskassen) and pension funds (Pensionsfonds) if they build up capital-funded occupational pension provision (§ 3 no. 63 sentence 1 EStG). Whether your employer offers one of these routes is shown in the offer. What matters is the implementation route, not the product name.
Worked example: what remains as net pay?
Assumption: Your gross salary is 3,500 euros per month. You convert 200 euros per month into a direct insurance policy. You have one child, and the health insurance additional contribution is on average 2.9 percent. The rates for 2026 are the employee shares.
- Employee shares 2026: pension insurance 9.3 percent, unemployment insurance 1.3 percent, health insurance 7.3 percent, additional contribution 1.45 percent (half of 2.9 percent), long-term care insurance 1.8 percent. Together 21.15 percent.
- The 200 euros are below the limit of 338 euros and are therefore free of contributions. The saving on social insurance is 200 times 21.15 percent, which is 42.30 euros per month.
- The pay subject to contributions falls to 3,300 euros. Without conversion it would be 3,500 euros.
- Before wage tax, your net pay is 157.70 euros lower if you convert 200 euros (200 minus 42.30 euros). The wage tax saving reduces this amount.
| Item (monthly) | Without conversion | With 200 euros conversion |
|---|---|---|
| Gross salary (assumption) | 3,500.00 euros | 3,500.00 euros |
| Of which salary sacrifice | 0.00 euros | 200.00 euros |
| Pay subject to contributions | 3,500.00 euros | 3,300.00 euros |
| Employee share of social insurance (21.15 percent) | 740.25 euros | 697.95 euros |
| Payout before wage tax | 2,759.75 euros | 2,602.05 euros |
Wage tax is left out of this table on purpose. It depends on your tax class, marital status and other deductions. The 200 euros of conversion are below the wage tax limit of 676 euros per month and therefore remain free of wage tax. How much this means in your case is calculated by the tax calculator of the federal finance ministry (bmf-steuerrechner.de) using your data.
Note: if you are childless and aged 23 or over, you additionally bear 0.6 percentage points alone for the childless surcharge (Federal Ministry of Health). The employee share then rises and the saving is slightly higher. Contribution rates change every year, so compare them with your payslip.
When does salary sacrifice pay off, and when not?
Salary sacrifice can pay off if you want to save regularly and take the tax and contribution saving with you. It becomes less attractive if your monthly budget is tight and you need the money at short notice, because it is then missing from daily life. Your advantage can also change if your income is low in a certain phase.
On the other side, the payout is not tax-free later on. Pensions from occupational pension provision are taxed in the payout phase (§ 22 no. 5 EStG). Pensions are also subject to health insurance contributions (§ 229 SGB V). Weigh these points against today’s saving. Academycon offers a personal assessment of your case on its how we work page.
What happens in the payout phase?
In the payout phase the type of benefit determines the charges. Pensions from occupational pension provision are subject to health insurance contributions under § 229 para. 1 sentence 1 no. 5 SGB V. Lump-sum payments follow separate rules, which the pension provider must explain. Ask before you sign which form of benefit is provided.
Income tax also applies in this phase. Benefits from direct insurance and pension funds are taxed under § 22 no. 5 EStG. The exact amounts then depend on your income in retirement, which nobody can reliably predict today.
Frequently asked questions
Does salary sacrifice always pay off?
No. The saving on taxes and social insurance is real, but the later taxation and the contributions in the payout phase belong in the calculation. Only a comparison with your personal situation shows whether it pays off for you.
What happens to amounts above 8 percent of the ceiling?
They are no longer free of wage tax under § 3 no. 63 sentence 1 EStG and are taxed like normal wage. For social insurance the 4-percent limit applies, for wage tax the 8-percent limit.
Does freedom from social insurance also cover health insurance?
Yes, the contribution freedom under the SvEV concerns social insurance as a whole, and health insurance is included. The 4-percent limit applies to the contributions paid in the year.
Where can I find the current limits?
The contribution ceiling of pension insurance is set every year. For 2027 the government draft names 8,850 euros per month, which has not yet been passed. You can find the current value with the German Pension Insurance and on your payslip.
What to do now
- Check the employer’s offer and determine the implementation route.
- Compare the employee shares with your payslip.
- Calculate the wage tax for your case with the federal finance ministry’s tax calculator.
- Weigh the payout phase, the health insurance contributions and the contract term against each other.
Related articles
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Sources: § 3 no. 63 EStG (retrieved October 2026), § 1 SvEV (retrieved October 2026), § 22 no. 5 EStG (retrieved October 2026), § 229 SGB V (retrieved October 2026), German Pension Insurance, contribution ceilings 2026 (status 2026), Federal Ministry of Health, contribution rates (status 2026).
Last updated: October 2026. This guide is general information, not individual advice.
