Company pension (bAV): is it worth it?

The bAV sounds like a gift from your employer: you save tax and contributions today. The catch comes later, at payout. Here I explain honestly how it works, what it really costs and whether it beats an ETF for Lena and Thomas. No jargon.

How it works

With the bAV your employer converts part of your gross salary into a pension contract. This is called salary sacrifice (Entgeltumwandlung). The trick: this part comes off your gross pay before tax and social contributions are calculated. So you pay less on it today, and that is exactly the advantage.

Two limits, as of 2026: up to about 676 € a month the contribution is tax-free, up to about 338 € it is also free of social contributions. And the employer must add at least 15 percent on top, because they save contributions too. Many add more. This top-up is the decisive lever, more on that below.

In retirement the contract is paid out, usually as a lifelong pension. And here is the flip side: this pension is fully taxed, and you pay the full health and care insurance contributions on it. Not half like on the state pension, but all of it yourself.

Strengths and catches

Both sides, plainly:

• Gift from the boss: the employer top-up is free money. From 15 percent upwards. No other route gives you that.
• Instant saving: because it comes off the gross, a contribution worth 150 € often costs you only around 70 € net. The rest is saved tax and contributions.
• Full contributions later: in retirement, tax plus the full health and care contributions come off. That eats a good part of the advantage back.
• Less state pension: the contribution-free part does not flow into the pension fund. So you collect a few pension points less and get a slightly smaller state pension later.
• Locked in: the money is tied up until 62 and linked to your job. If you change employer you have to deal with the contract. It is not flexible.

Lena and Thomas with a bAV

As a reminder: Lena (30) had a gap of about 1,334 €, Thomas (50) about 572 €. Both convert 150 € a month. I show you what actually arrives in retirement, after all deductions and after the slightly smaller state pension. All figures calculated with the app's formulas, in the realistic scenario and in today's purchasing power.

Lena converts 150 € a month

37 years of time. The 150 € gross cost her only around 72 € net. The employer adds 15 percent. By retirement this grows into a capital of about 342,000 €.

Thomas converts 150 € a month

Only 17 years until retirement. Net the 150 € cost him around 75 €. By then about 66,000 € comes together.

bAV or ETF?

Now the honest comparison. Take Lena's real cost of 72 € and put it into an ETF savings plan instead. Result: the ETF gives her about 257 € a month, the bAV about 233 € net. For Thomas it is almost level, 81 € against 83 €. So with the mandatory 15 percent top-up the bAV is no sure winner, it lands roughly at ETF level.

The reason: the nice tax break on the way in is eaten back at payout by the full health and care contributions and the smaller state pension. The bAV really pays off only when your employer adds clearly more than 15 percent. That is exactly what you can set in the app and watch the number turn.

One thing always speaks for the bAV, though: it pays for life. The ETF is calculated so that the capital lasts until the assumed life expectancy of 87, then it is empty. The bAV keeps paying, however old you get. One is flexibility, the other is security without end.

Realistic scenario, statutory health insurance (KVdR) and contributions assumed flat, salary grows like the average, employer top-up 15 percent. Illustrative examples, not a forecast and not advice. The routes are not added together.

Run it for your situation

Whether the bAV pays off for you depends above all on your employer's top-up, your tax rate and the time you have until retirement. In the app you set your contribution and the top-up yourself and immediately see the real net cost, the net pension and the smaller state pension, all side by side with an ETF and other routes. Fully local, no sign-up and no tracking.