Pension: No more double tax – some years still have disadvantages

Because the pension should be fairer, the federal government wants to put an end to double taxation.

However, certain age groups are left behind. 

Hamburg/Berlin – The double taxation of pensions is unconstitutional.

A ruling by the Federal Fiscal Court (BFH) from May 2021 therefore required a change in pension taxation so that there would be no double taxation for certain age groups in the future.

The federal government has reacted: Although the statutory pension is to be fully taxed in the future, the full amount of the insurance contributions can be deducted from taxes.

But some vintages could have much less of it.

Pension should be fairer: traffic lights want to put an end to double taxation

The pension system is to be revised in 2023, which will be advantageous for many pensioners, as taxes will then only be due once in the future.

In addition, around 21 million retirees will benefit from a further adjustment after the statutory pension was increased in July last year.

Federal Labor Minister Hubertus Heil (SPD) has confirmed that pensioners can again expect a “noticeable increase” in their pensions in the summer.

From July 2023, pension recipients will receive an increase of 3.5 percent in western Germany and 4.2 percent in eastern Germany.

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Because the pension should be fairer, the federal government wants to put an end to double taxation.

However, certain age groups are left behind.

(24hamburg.de assembly)

© Lobeca/agefotostock/Imago

Which age groups are further affected by the double taxation of the pension

And improvements are also being made to taxation.

Until now, employees have often had to pay tax on both their insurance contributions and their pension, which is known as double taxation.

The traffic light government wants to eliminate this injustice in pensions by abolishing double taxation.

In the future, the pension will continue to be taxed, but the previous insurance contributions can be fully deducted from tax from 2023.

Although this change is positive, some cohorts will get nothing from this reform for pensioners.

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Pension tax – so far, recipients have had to hand over this much to the tax office

People who retired two years ago, i.e. in 2021, have to tax 81 percent of their pension payments at their individual tax rate.

For people who retired in 2022, it's already 82 percent and this year it will be 83 percent.

People retiring in 2040 would have had to pay 100 percent tax on their entire pension due to the previous increase.

But that too is about to change.

Transitional period for double tax: Full taxation of the pension only in 2060

Because although one would like to get away from the taxation of the payment into the pension, an extended transitional period for the pension taxation is now to be introduced.

It is planned that pension payments will not be taxed at 100 percent from 2040, but only from 2060.

A case study for the

, conducted by pension expert Werner Siepe, shows the effects of the Ampel coalition's pension reform on the tax advantages of each cohort.

Since the annual increase in taxation between 2040 and 2060 has not yet been determined, he has assumed an estimated rate of increase of 0.5 percent per year for his calculations.

Decreasing pension tax: Which year will benefit the most?

Pension reform with longer transition periods: certain age groups benefit more

The extended transition period has a tax advantage for some retirees, while others are disadvantaged - including those born at 63 who can retire earlier.

Those born in 1975 and 1980 will benefit the most from the transition, while those born in 1960 and 1990 will benefit less.

Double taxation: Changes should avoid burdens for pension recipients

The traffic light government is striving to keep double pension payments as low as possible with the changes in the future.

Around 20 million pensioners are currently affected.

Everyone else either retired before the new regulation was introduced or receive so little pension that no taxes have to be paid.

The obligation to provide evidence of double taxation lies with pension recipients

Although the federal government has taken measures to avoid double taxation, it is likely that in many cases there is still a risk of double taxation on pensions.

However, you can resist it once you retire.

The basic problem remains with taxpayers, because they have to prove later that double taxation has occurred.

This not only requires an extensive calculation, but also proof of which contributions have been made - and how they have been taken into account for tax purposes.

Important: Be sure to keep all tax assessments

Taxpayers must therefore submit all tax assessments.

The tax office, which also expects pensioners to file a tax return from 2023, does not keep these notices and is not yet obliged to do so.

It is therefore urgently advisable to keep all tax assessments carefully for all years.

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Until March 31st: more pension through voluntary contributions – including protection against inflation

List of rubrics: © Lobeca/agefotostock/Imago