BGH scraps clause allowing unilateral pension cuts - German court strikes down unfair pension cuts in landmark ruling
A recent ruling by Germany’s Federal Court of Justice (BGH) has declared a controversial pension clause unfair. The decision affects contracts where insurers could cut payouts without later restoring them. Up to one million policyholders may now see changes to their agreements.
The BGH targeted a clause used in Riester pension contracts, mainly by Allianz Life Insurance. Between July 2001 and June 2013, this clause let insurers reduce the pension conversion factor if unexpected financial conditions arose. However, the court ruled it invalid because it did not require insurers to reverse the cuts if conditions later improved.
The BGH’s decision removes the legal basis for unilateral pension cuts without future adjustments. Policyholders with contracts from the specified period may receive refunds or revised terms. The ruling sets a precedent for how insurers must handle similar clauses in the future.
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