Company Pension in Your First Job: Using the Employer Top-Up

A company pension (betriebliche Altersvorsorge) in your first job sounds like paperwork, but it is often the simplest route to an employer top-up. If you convert part of your gross salary, you receive additional amounts from your employer under certain conditions and save on social security contributions. This guide explains how the model works, which limits apply and when it makes sense for people starting their careers.

Key Points at a Glance

• You have a statutory right to salary conversion for your company pension, if you request it.
• The employer pays 15 percent of the converted amount on top, insofar as it saves social security contributions.
• Up to 8 percent of the contribution assessment ceiling of the statutory pension insurance, the contributions are tax-free. Up to 4 percent, they are also free of social security contributions.
• The later payout is taxed. Health and long-term care contributions may also become due then.
• The reform of private retirement provision has been passed and is expected to apply from 2027. It should be considered separately.

What Is Salary Conversion and How Much Can You Convert?

With salary conversion, you give up part of your future earnings in favour of an occupational pension (betriebliche Altersversorgung). The money does not go into your bank account. Instead, it goes into a pension route, such as a direct insurance policy (Direktversicherung), a pension fund (Pensionskasse) or a pension fund vehicle (Pensionsfonds). The entitlement follows from § 1a of the Company Pensions Act (Betriebsrentengesetz, BetrAVG). You can require your employer to use part of your future pay entitlements for your company pension, up to 4 percent of the contribution assessment ceiling of the general pension insurance.

For 2026, the contribution assessment ceiling of the statutory pension insurance is €101,400 per year. Eight percent of that is €8,112 a year, or €676 a month. Up to this ceiling, the amount remains free of wage tax. It is free of social security contributions only up to 4 percent, which is €4,056 a year or €338 a month. If the conversion lies between these two limits, it remains tax-free but becomes subject to social security contributions. Above 8 percent, the excess part is taxed and subject to contributions like normal wages.

How High Is the Employer Top-Up?

The employer top-up (Arbeitgeberzuschuss) is 15 percent of the converted salary. It applies insofar as the employer itself saves social security contributions through the conversion. This is the case for most conversions, because the converted amount falls out of the contribution-liable pay. The top-up is therefore set by law and is not a bonus that the employer grants at its discretion.

Calculation example (assumption): You earn €3,000 gross per month and convert €100 into your company pension. The employer top-up is €15 per month, so €115 a month flows into your retirement provision. On the converted amount, around 20 percent social security contributions are assumed, which you no longer pay. Your net pay therefore falls less sharply than the €100 conversion, before wage tax is taken into account.

Do not estimate the exact net effect including wage tax yourself. The Federal Ministry of Finance’s tax calculator at bmf-steuerrechner.de works this out for your tax class and your situation. The figures above are deliberately simplified, because the actual social security burden depends on the health insurance additional contribution (Zusatzbeitrag), the childless surcharge (Kinderlosenzuschlag) and the contribution rate.

Why Is Tax Freedom So Important?

The conversion up to the limit of 8 percent of the contribution assessment ceiling is tax-free under § 3 No. 63 of the Income Tax Act (Einkommensteuergesetz, EStG). This means that no wage tax is due on this amount in the year of conversion. The payout in retirement is taxed later. This effect is called deferred taxation (nachgelagerte Besteuerung). For career starters with a low income, the tax advantage is often smaller than for high incomes, because the tax rate in the year of conversion is lower.

When Is Company Pension Worth It in Your First Job?

It is worthwhile above all if your employer pays the top-up and you want to set the money aside for the long term anyway. The top-up is a safe benefit that you cannot achieve with pure self-saving. In the first years of work the amounts are usually small, but compound interest makes a difference over decades. The question of whether to convert in your first job at all, given your reserves and a possible job change, is covered in the guide Occupational Pension in Your First Job: Yes or No? (in German). This guide focuses on how the top-up and the limits work.

Be careful if you need money in the short term or are not sure how long you will stay with the company. What you convert yourself remains yours after a job change under § 1b para. 5 BetrAVG. For parts that the employer co-finances, such as the top-up, the vesting periods of § 1b para. 1 BetrAVG may apply (promise in place for at least three years, age at least 21). Also check the costs and conditions of the pension route, because they differ between models. Health and long-term care contributions may also be due on later payouts. Clarify this before you commit.

What Does the Riester Reform Mean for You?

The Bundestag (German federal parliament) has passed a reform of private retirement provision, which is expected to apply from 2027. Among other things, it provides for a starter bonus of €200 (Berufseinsteigerbonus) for contracts concluded before the age of 25. This reform concerns private provision, not the company conversion. Both can exist side by side, but they are subsidised differently. Before you conclude a contract, check the adopted version and the status of the legislative process, because details may still change.

How Do You Go About Setting It Up?

Start with a conversation with your employer or the responsible HR department. Ask about the pension route, the costs, the commitment and the rules on vesting. Have the conversion confirmed in writing before you see it on your payslip. Then use the tax calculator to work out how the conversion affects your net pay.

Frequently Asked Questions

Does my employer have to offer a company pension?

You have a right to salary conversion if you request it. The right exists within the statutory limits under § 1a BetrAVG. Whether your employer provides a specific pension route depends on the company, so ask specifically whether an offer exists.

Do I lose money if I change employers?

Not necessarily. The part you converted yourself remains yours under § 1b para. 5 BetrAVG. For the employer top-up, the periods of § 1b para. 1 BetrAVG may apply, meaning a promise in place for at least three years and an age of at least 21. How your own contract handles this is set out in the contract documents. Check the contract when you change jobs and, if necessary, have it transferred.

Is the payout from the pension taxable straight away?

No. The payout is not taxed immediately but in the payout phase. Then the general rules for pensions and lump-sum payments apply, which vary depending on the model. Your pension provider or a tax adviser can give you information.

Can I change the conversion later?

That depends on your contract. As a rule, the amount of the conversion can only be changed on certain dates or with a notice period. Read the agreement carefully before you sign it.

What to Do Now

1. Ask your employer whether a company pension is offered and, if so, which one.
2. Have the conversion amounts, the employer top-up and the costs confirmed in writing.
3. Use the tax calculator of the Federal Ministry of Finance to work out your net pay after the conversion.
4. Check the rules on vesting and what happens if you change employers.
5. If you are unsure, get a personal assessment before you sign the contract.

Related Reading

• Career Start After University: Your Guide to the First Job
• Health Insurance After Graduation: From Exams to Your First Job
• Retirement Provision for Students: Starting Early With Small Amounts
• Building Wealth as a Student: Starting Small
• Pension Insurance for Students in Germany: Rules

Sources: Company Pensions Act (BetrAVG) § 1a (entitlement to salary conversion) (Stand: October 2026), Income Tax Act (EStG) § 3 No. 63 (tax-free contributions to company pensions) (Stand: October 2026), Social Insurance Remuneration Ordinance (SvEV) § 1 para. 1 no. 9 (social security exemption up to 4 percent of the contribution assessment ceiling) (Stand: October 2026), German Pension Insurance: contribution assessment ceilings (Stand: 2026), Company Pensions Act (BetrAVG) § 1b (vesting) (Stand: October 2026).

Stand: October 2026. This guide is general information, not individual advice.