Betriebliche Altersvorsorge (bAV)

Betriebliche Altersvorsorge (bAV), or occupational pension, is an employer-sponsored retirement savings scheme in Germany where employees can contribute part of their gross salary (before tax) to build a company pension. Since 2019, employers are legally required to contribute at least 15% of the employee's contribution amount, making bAV an attractive retirement savings option.

For 2026, employees can contribute up to €7,248 per year tax-free and up to €3,624 free from social security contributions. Contributions are deducted from gross salary, reducing taxable income and social security obligations immediately. However, pension payouts in retirement are subject to income tax and health insurance contributions. Employees have portability rights if changing jobs.

Real-World Example If Anna earns €50,000 and contributes €3,000 annually to her bAV, her employer adds at least €450 (15%). Anna saves approximately €1,260 in taxes and social contributions immediately (assuming 42% combined rate). Her €3,450 grows tax-deferred until retirement, though she'll pay income tax on withdrawals later.