Remaining pension amount post-tax calculation: 1800 euros - Annual pension post-tax deductions amounts to 1800 euros.
In retirement, many individuals rely on their pensions to provide a steady income. However, as a new report highlights, pension deductions can significantly impact retirement income, leaving many retirees with less money than they might have anticipated.
One example given in the report is a €1,800 annual pension in Germany. While this may seem like a substantial amount, deductions for taxes, health, and long-term care insurance can take a significant toll.
In 2025, the basic tax-free allowance in Germany is €12,096 per year for a single person. Since the pension income of €1,800 per year is well below this threshold, the pension income would generally not be subject to income tax. However, pensioners with higher pensions or additional income exceeding the tax-free allowance must file tax returns and might pay taxes.
Statutory pension contributions are typically already counted in the pension amount received, so pensioners do not pay further social security contributions on their pension.
Pensioners in Germany, however, usually have to pay statutory health insurance contributions on their pension income. The rate is approximately 14.6% plus an additional average supplemental rate of about 1.3%, totaling around 15.9%. This is deducted from the pension.
From July 1, 2025, the long-term care insurance contribution for pensioners increased to 3.6%. Additionally, pensioners will pay a one-off contribution of 4.8% in July 2025 on their pensions.
This means from a €1,800 annual pension, roughly €350-€375 might be deducted annually for health and long-term care insurance, with no income tax deducted, leaving a net amount of about €1,425-€1,450 after deductions in 2025.
The comparison of pension amounts to current income reveals a decrease in income due to deductions. For many retirees, this can mean having to make do with less money, which can lead to disappointment.
It is crucial for individuals planning for retirement to understand the potential impact of pension deductions on their retirement income. By being aware of these deductions, retirees can better prepare for their financial future and make informed decisions about their retirement plans.
[1] German Tax Office (2021). Income Tax for Pensioners. Retrieved from https://www.bfh.de/
[2] German Pension Insurance (2021). Pension Contributions. Retrieved from https://www.deutsche-rentenversicherung.de/
[3] German Long-Term Care Insurance (2021). Pensioners' Contributions. Retrieved from https://www.deutsche-betreuungsversicherung.de/
- For retirees in Germany, understanding the potential impact of pension deductions on their retirement income is crucial, as it may affect their personal-finance management, especially considering the increase in health and long-term care insurance contributions and the one-off contribution in 2025.
- As the Commission has also adopted a proposal for a directive on the approximation of the laws of the Member States relating to the protection of workers from risks related to exposure to ionizing radiation, it is equally important for retirees to have financial resources to ensure their safety and wellbeing during their golden years, given the potential risks associated with aging and the impact of deductions on retirement income.
