German BGH Strikes Down Pension Cut Clause for Riester Policyholders

Jan 8, 2026 Benn-Ibler Rechtsanwälte

The German Federal Court of Justice (Bundesgerichtshof, hereinafter BGH) was required to adjudicate the validity of a provision contained within the terms and conditions of a unit-linked pension insurance policy.

Pension factor reductions

From June to November 2006, an insurance company provided Riester[1] pension plans in compliance with the German Pension Provision Certification Act. The general terms and conditions included a provision permitting the insurer to reduce the stated pension factor in response to unforeseen circumstances, such as significant increases in life expectancy or decreases in investment returns. Conversely, the provision did not require the insurer to adjust the pension factor upward in the event of more favourable developments.

The insurance company exercised this right to reduce the pension factor on several occasions. A consumer association filed a lawsuit seeking an injunction. While the regional court dismissed the action, the higher regional court ruled in favour of the association, prohibiting the use of the clause. The BGH has now confirmed this ruling and declared the clause invalid.

Invalid clauses

Section 308 No. 4 of the German Civil Code (Bürgerliches Gesetzbuch, hereinafter BGB) prohibits clauses that let providers change or reduce promised services without a valid reason. Here, although the clause cites objective reasons for service reduction, it is unfairly structured by disregarding improvements that benefit the insured.

Moreover, alternative measures fail to sufficiently safeguard policyholders’ interests, making it unjustifiable to waive the requirement for mandatory restoration of the pension factor. Options like profit participation, which relies on the insurer’s financial performance, and tax-restricted opportunities for extra premium payments, do not provide adequate compensation. As a result, without an explicit legal obligation for the insurer, policyholders face undue disadvantages under Section 307(1) of the BGB, rendering such clauses invalid.

Press Release No. 227/2025: BGH IV ZR 34/25 (10 December 2025)