Company Pension Strengthening Act II (“BRSG II”) – Draft by the Federal Government – What it brings and who benefits from it!

On 3 September 2025, the German government published its draft of the BRSG II. There are no significant changes compared to the unimplemented BRSG II draft from the last legislative period.  Worth mentioning is the evaluation mandate given to the BMAS. By 2030, it is to examine whether the prevalence of company pension schemes has increased noticeably as a result of the planned opening up of social partnermodels.

Unfortunately, the big breakthrough for company pension schemes is unlikely to happen. It is questionable what companies can expect then.

We will briefly outline the key measures for increasing the efficiency, attractiveness and prevalence of company pension schemes:

Severance payment scheme

There will be an additional severance payment option to supplement the existing severance payment scheme. Accordingly, in addition to the existing severance pay option under Section 3 (2) of the German Company Pensions Act (BetrAVG), small pension entitlements can in future be settled at up to 2% of the monthly reference amount pursuant to Section 18 SGB IV or, in the case of capital payments, at up to 24/10 of the monthly reference amount pursuant to Section 18 of the German Social Security Code IV (SGB IV). However, this requires the employee’s consent and that the severance payment is used by the employer directly to pay contributions to the statutory pension insurance scheme.

Our view: The hurdles associated with the new regulation (obtaining and documenting consent, social security and income tax implications due to the obligation to pay the settlement to the statutory pension insurance scheme) will require a legally compliant redesign of the settlement processes/documents with regard to the additional settlement option.

Withdrawal of the company pension

In future, early withdrawal of the company pension will no longer be dependent on receiving a full pension from the statutory pension insurance scheme. This brings the BetrAVG into line with the additional income limits that have been abolished in the statutory pension insurance scheme. It will be possible to receive statutory and company pension benefits in parallel with continued employment (even beyond the normal retirement age).

Our view: Due to the increasing shortage of skilled workers, employers will have to deal more and more with the issue of pension payments alongside continued employment. Employers will have to adjust the eligibility requirements for pension commitments and find answers to questions such as how to deal with deferred compensation and existing instruments such as partial retirement and working time accounts. In addition, they will have to tackle the administration of their company pension schemes if the pension commitment is to provide for both pension payments and contributions to the company pension scheme in future.

Automatic deferred compensation

Currently, employers can only introduce automatic deferred compensation, which employees have the right to opt out of (known as an “option system”), if this is provided for in a collective bargaining agreement or permitted by a collective bargaining agreement opening clause. In future, this will also be possible without a collective bargaining agreement in a works council agreement if the remuneration entitlements are not and are not usually regulated in a relevant collective bargaining agreement and the employer additionally pays an employer subsidy of 20% of the converted remuneration.

Our view: Remuneration entitlements are regulated by collective bargaining agreements in many industries. The scope of application of company option schemes could therefore be limited to conversions of non-collectively agreed remuneration in specific individual cases. Employers will therefore have to check for which remuneration components a company option scheme can be introduced if they are considering doing so.

Agreement via a social partner model

Furthermore, employers not bound by collective bargaining agreements will in future be able to participate in a relevant collective bargaining agreement via a social partner model with the consent of the parties to the collective bargaining agreement supporting the social partner model. In addition, participation in a non-relevant collective bargaining agreement provision will also be possible if an opening clause in the relevant collective bargaining agreement provides for this or if the trade union supporting the social partner model is responsible for the employment relationship under the collective bargaining agreement. The parties to the collective bargaining agreement supporting the social partner model may require employers not bound by collective bargaining agreements to contribute appropriately to the costs incurred in connection with the implementation and management of the social partner model.

Our view: The provisions on the social partner model will not expand the user group in the long term. Due to the continuing collective bargaining reservation and reference to existing social partner models, it is to be expected that only a small number of employers will be able to take advantage of the pure defined contribution scheme. In areas where there are no relevant collective bargaining agreements, it will still not be possible to refer to a relevant collective bargaining agreement provision. This means that, for the time being, the way is blocked to making this highly efficient form of pension provision available to employees of companies not bound by collective bargaining agreements.

However, in our view, the participation of companies not bound by collective bargaining agreements in social partner models remains an important part of a strategy to promote company pension schemes. 

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Conclusion: The opportunities offered by the BRSG II for increasing the efficiency, attractiveness and prevalence of company pension schemes are complex and require careful review and consideration in advance by employers who are considering implementing one or more of the above measures.

However, employers are dependent on taking advantage of the opportunities offered by the BRSG II. Waiting for the BMAS to complete its review by 2030 and the subsequent legislative response increase the risk of later ending up with a mandatory system that offers less scope for flexibility.

PwC Legal will be happy to advise you on this!