ecsolutions Precaution Insurance Policies Employees and Benefits

More net from your pension - full taxation of old-age pensions will come later!

Those who retire after 2022 will have to pay tax on a smaller portion of their retirement income. This is because the tax-free allowances for retirement income are being increased over a longer period of time and in smaller increments.

Statutory old-age pension

The basis for the income taxation of pensions from the statutory pension insurance is the taxable portion of the pension. This is the part of the pension that is not exempt from taxation by an allowance. The later the pension begins, the higher the taxable portion and the smaller the pension allowance.

The taxable portion for new pensioners born in 2023 is 82.5 percent of the pension, and for pensioners born in 2024 it is 83.0 percent. For new pensioners born in 2058, it will eventually reach 100 percent; the pension will then be fully taxable.

Civil service pensions

Pensions and surviving dependents' benefits are fully taxable. A tax-free pension allowance and a supplementary allowance ease the tax burden. These two allowances are reduced in parallel with the tax-free pension allowance for statutory pensions for each year of pensioners, and this process is now being phased out by 2058.

The tax-free pension allowance for those retiring in 2023 is 14 percent of the pension payments, up to a maximum of €1,050 per year. The supplement to the tax-free pension allowance is set at €315.

If you retire in 2024, the pension allowance will be 13.6 percent of your pension payments, up to a maximum of 1,020 euros, and the supplement will be 306 euros.

Company pensions from direct insurance or a benevolent fund

The company pension paid by a former employer is largely treated the same as civil service pensions for income tax purposes. The same applies if the employer provides the company pension through a benevolent fund. Company pensioners thus also benefit from the improvements in the Growth Opportunities Act.

Insurance benefits from a direct insurance policy, a pension fund, a supplementary insurance fund or a pension fund are not considered to be pension benefits in the aforementioned sense for tax purposes. Nothing changes here.

Other retirement income

After reaching the age of 64, the age relief amount reduces the tax base of other retirement income, such as wages or rental income. The age relief amount will now only be phased out by 2058.

Dirk Dettbarn