Pension increase 2023: Even more plus in the wallet - but there is a catch

Created: 08/05/2022, 06:00

By: Jasmine Farah

The pension will be increased significantly this year.

That makes some people happy in this country.

It should continue like this in the coming year.

But some retirees have to be careful.

The Corona and Ukraine crises are taking their toll.

Inflation is rising and so are food and energy prices.

That is why the traffic light coalition put together a relief package for German citizens some time ago.

At first, however, pensioners were not considered.

But it is precisely this group of people who are hit hardest by the price increase.

For this reason, Federal Labor Minister Hubertus Heil (49, SPD) announced a pension increase a few months ago.

Pension increase 2023: Even more plus in the wallet - but there is a catch

According to this, a total of 21 million pensioners have received 5.35 percent more pension since July 1st in western Germany, and in the eastern federal states it is even 6.12 percent.

According to the Federal Ministry of Finance, the adjustment of pensions between East and West should be completed in two years at the latest.

In 2022 and 2023, many pensioners will receive more money.

© dpa / Andreas Gebert

With the goal that pensioners have more money to live on.

And the joy is great: In 2023, the old-age pension should continue to rise.

However, this will not be quite as high.

And this despite the fact that the federal government only reintroduced the catch-up factor in pension insurance in June of this year.

It was supposed to be suspended until 2025.

Instead, it is now being activated again, although at the same time care should be taken to ensure that the pension level is maintained.

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Pension increase 2023: That means the catch-up factor

“Since the level of pensions follows the development of wages, pensions should actually have fallen last year because wages had fallen significantly due to the pandemic.

However, the pension guarantee that has been in force since 2009 has prevented this,” says the website of the German Bundestag.

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And further: “The catch-up factor, which ensures that the future pension increase after wage increases will be lower than they actually have to be, is considered to compensate for such a prevented reduction.

The federal government now wants to reintroduce this temporarily suspended dampening effect.”

Pension increase 2023: don't ignore pension tax

This means that a further increase in pensions can be expected in 2023.

In contrast to this year, however, this will not be as high as it would have been without the catch-up factor.

But does this have consequences for the pension tax?

For many pensioners, this actually also harbors a drop of bitterness.

As a result, the increase may mean that they have to pay tax on their contributions for the first time.

This is because, for the first time, the taxable part of their gross annual pension exceeds the tax-free allowance for single people (9,984 euros) and for married couples (19,968 euros).

As the Federal Ministry of Finance finally reports, around 103,000 pensioners will be affected by this in the future.