Pensioners in Germany: Current figures and tax advantages for the older generation

Pensioners in Germany: Current figures and tax advantages for the older generation

According to a report by amp.focus.de,

In Germany, pensioners are people who are not actively employed or gainfully employed and who earn their living from a pension, i.e. from a statutory or private insurance benefit.

The number of German pensioners is continuously increasing. The German pension insurance system counted more than 20 million pensioners in 2023, and the number is expected to continue to rise as the population in the Federal Republic is getting older and older.

When it comes to taxes, pensioners must pay tax on the income they receive from pension insurance. The taxable portion of the pension increases by two percentage points annually for new retirees. If you retire in 2020, this proportion will already be 80 percent. Pensioners who retire in 2040 or later are generally subject to full taxation. However, this does not necessarily mean that they actually have to pay taxes.

For pensioners who receive their pension for the first time by 2039, the tax office calculates a “pension allowance”, which exempts part of the pension from tax. This amount remains unchanged even if the pension increases due to pension increases. Future adjustments to the pension will therefore increase the individual taxable pension income and will be subject to full tax liability.

The annual basic allowance for a certain pension amount is 11,784 euros in 2024, so that pensioners whose pension is lower do not have to pay taxes.

For pensioners who emigrate abroad, little changes when it comes to receiving their pension, as the German pension insurance continues to transfer the amount to the account. If a German pensioner no longer lives in Germany, the Pension Service of Deutsche Post AG checks once a year whether the pensioner is still alive.

It should be noted that people who have paid very high contributions to pension insurance in the past must provide corresponding evidence in their income tax return.

With regard to the consequences for the market and the financial sector, it is expected that the increasing number of pensioners in Germany will increase the demand for age-appropriate products and services. This could create investment opportunities in healthcare, care and leisure sectors. In addition, tax aspects, particularly in an international context, could lead to increased demand for tax advice and services.

The popularity of certain countries as retirement destinations could have an impact on the real estate and financial markets of these destination countries, as an increase in foreign retirees could lead to changes in demand for housing and financial services.