Salary conversion: what actually reaches you?
“€100 of pension costs you only €50 net.” The sentence is true — and still misleading, because it shows half the calculation. The other half arrives thirty years later. Here is the whole thing.
How salary conversion works
You give up part of your gross salary. That part goes directly into a pension contract your employer takes out for you. Because the money never leaves the gross figure, you initially pay neither income tax nor social contributions on it.
- Free of income tax up to 8 % of the pension insurance contribution ceiling (§ 3 no. 63 EStG)
- Free of social contributions only up to 4 % of the same ceiling
Between 4 % and 8 % you save tax but not contributions. In euros, for 2026 that means:
| Limit 2026 | per year | per month |
|---|---|---|
| Free of income tax (8 % of the ceiling) | €8,112 | €676 |
| Also free of social contributions (4 %) | €4,056 | €338 |
| Pension insurance contribution ceiling | €101,400 | €8,450 |
Source: Sozialversicherungsrechengrößen 2026, Deutsche Rentenversicherung. These figures change every year — check each January.
Phase 1: what you save today
Convert €100 gross and you lose noticeably less than €100 net — because tax and your share of social contributions would otherwise have applied. How large the saving is depends mainly on your marginal tax rate.
Phase 2: what is deducted later
Full taxation
The payout is taxed in full at your personal rate at the time. That rate is usually lower in retirement than during working life — which is precisely where the real advantage comes from.
Health and care contributions
This is what surprises most people. Those in the statutory health system pay contributions on company pensions (§ 229 SGB V) — at the full rate, not just the employee share. Since 2020 there is an allowance in health insurance — €197.75 per month in 2026 — below which the monthly company pension stays contribution-free; that allowance does not apply to long-term care insurance.
Contributions saved while paying in are repaid in another form while paying out. Leaving that out systematically flatters the company pension.
The quiet item: your statutory pension falls
Because no pension insurance contributions are paid on the converted portion, it earns no pension points, so your later statutory pension is lower. The effect is modest at small conversion amounts, but it exists. Above the contribution ceiling it disappears, because no pension contributions arise there anyway.
The employer subsidy decides everything
If you remember one thing from this text, make it this: in most cases your employer's subsidy decides whether salary conversion is worth it.
The statutory minimum is 15 % of the converted amount where the employer saves social contributions (§ 1a(1a) BetrAVG). Since 2022 this applies to all commitments, including old ones.
| Employer subsidy | Assessment |
|---|---|
| 15 % (statutory minimum) | Tight. At a low tax rate a private solution can win. |
| 20–30 % | Solid. The company pension leads in most situations. |
| Above 30 % or employer-funded | Hard to beat. Not taking it up leaves money on the table. |
Work it out yourself
The calculator covers the paying-in phase: what flows into your provision, and what you give up at the end of the month. Everything is computed in your browser — your entries never leave this device and are stored nowhere.
The calculator needs JavaScript. Alternatively we go through the numbers together in an initial call.
For – net a month, – goes into your provision — –× as much.
An estimate, not a quote. The calculator covers only the paying-in phase. What finally reaches you also depends on taxation of the payout, health and care contributions and the reduced statutory pension — see the sections above. A precise payroll calculation needs your tax class, church tax and allowances; we do that together with your real payslip.
When it pays — and when it does not
Clearly in favour
- Your employer pays well above the statutory 15 %
- You have many years left to retirement
- Your current tax rate is high and you expect a lower one in retirement
- Your income is above the contribution ceiling — the pension reduction then disappears
Rather against
- Only the statutory minimum subsidy combined with a low income
- You change employers often — provision fragments into small contracts
- You need access to the capital, for instance for a property purchase
- You expect a similar tax rate in retirement to today's
- You may leave Germany before retiring
The short version is on the company pension page for employees; employers should start with the employer page.
Your numbers, a clear answer
Bring your payslip and the details of your employer's subsidy. In 30 minutes you will know where you stand.