MIL OSI Translation. Region: Germany / Deutschland –
Source: Destatis Federal Statistical Office
Transition from upstream to downstream taxation leads to an increase in the taxable portion of pensions
Press release 508 from December 15, 2020
WIESBADEN – In 2019, 21.6 million people in Germany received benefits amounting to 328 billion euros from statutory, private or company pensions. As the Federal Statistical Office (Destatis) also reports, that was 5.2% or 16.3 billion euros more than in 2018. The number of retirees rose by 86,000. Most pensions only include part of the taxable income. In 2019, this was 62.1% of pension benefits with 203 billion euros. Since 2015, the proportion has increased by 6.8 percentage points.
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The reason for the increase is the new regulation of the taxation of retirement income in the Retirement Income Act of 2005. The core element of the new regulation is the transition from an upstream to a downstream taxation of statutory pensions up to the year 2040. Accordingly, the expenses for old-age security in the savings phase will be gradually exempt from tax and the benefits are only taxed in the payment phase. Which portion of the pension income counts as taxable income depends on the year in which the pension commences: the later the pension commencement, the higher the taxed portion of the pension income.
How many pensioners pay income tax is not yet known due to the long deadlines for tax assessment for 2019. The latest information on pension taxation is available for 2016. Accordingly, 6.1 million (29%) of the total of 21.3 million people with benefits from statutory, private or company pensions had to pay income tax on their pension income. That was around 284,000 people or 1.3 percentage points more than in 2015.
A large proportion of the tax-burdened recipients of pensions – including surviving spouses and children – have other income in addition to the pensions. In the case of married couples taxed together, this can also be the partner’s income, which is added together for taxation.
This information comes from the statistics of the pension receipt notifications and the wage and income tax statistics.
You can find further results according to the taxation approach and size classes of pension benefits here.
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EDITOR’S NOTE: This article is a translation. Apologies should the grammar and / or sentence structure not be perfect.