Pension alarm: How not to lose your hard-earned money!

Pension alarm: How not to lose your hard-earned money!

A complete pension account is crucial for correctly calculating your future pension. In order to close existing gaps in your insurance history, it is recommended that you seek account clarification. The tax regulations are particularly important for people who will retire in 2025. Anyone who retires this year will have to pay tax on 83.5% of their pension, while the rest remains tax-free. Every year the taxable share increases by 0.5%, which means that the taxable share for 2026 is 84% ​​and for 2027 it is 84.5%, as chip reported.

Another important aspect is the pension allowance. For 2025 this is 16.5% of the pension. For future pensioners who retire in 2058 or later, they will have to pay tax on 100% of their pension and the pension allowance will no longer apply. Whether taxes have to be paid depends, among other things, on the amount of the pension, other income and the basic tax allowance. It is also advisable to use a pension tax calculator to determine your personal tax liability and expected tax burden.

Important information about pension taxation

The taxation of the pension also depends on the year in which the pension begins. This means that from the start of retirement until December 2005, 50% of the gross pension is taxable. This regulation has changed as the taxable share increased by two percentage points annually until 2020. From 2020, 80% of the pension will be taxable before the increase reduces to just 0.5% annually. From 2058, pensioners will have to pay tax on 100% of their pension benefits, while pensioners will receive a pension allowance until 2057, which will remain unchanged in subsequent years, even if the pension increases, explains the German Pension Insurance.

A practical example makes this clear: Maren K. received a gross pension of 12,000 euros in 2005. Your pension allowance was 6,000 euros. Even when her gross pension rose to 16,905 euros in 2023, the pension allowance remained at 6,000 euros. However, the pension allowance can be adjusted for partial pensions or income credits.

Required steps for retirees

To ensure that all relevant information is processed correctly, pensioners should file an income tax return, even if they are not required to include specific state pension data. The German pension insurance automatically transmits relevant data to the tax office, but pensioners are obliged to submit a declaration with Appendix R. A free certificate to provide proof to the tax authorities can be requested and will usually be sent automatically by the end of February in subsequent years.

An additional tool is the tax administration's retirement income calculator, which supports pensioners in determining income tax. The new deferred taxation rule allows pension expenses to remain tax-free, while pension income is taxed later.

Overall, it is essential for pensioners to familiarize themselves with pension taxation regulations in order to avoid unforeseen financial losses.