Increased pension benefits in Germany projected to reach 403 billion euros by 2024
In a significant development, it has been revealed that taxable pension income in Germany has been on an upward trend over the past few years. While exact figures on the magnitude of this increase and specific changes in the proportion of pensioners paying income tax are not readily available, some contextual information can help us understand the trends.
Firstly, the tax-free allowance (Grundfreibetrag) for income in Germany, which determines whether pension income is taxed, has been steadily increasing over recent years. For instance, the tax-free allowance for singles was raised to €11,784 in 2024 and further to €12,096 in 2025. This increasing allowance means that pensions or other incomes below this threshold are not subject to income tax, potentially influencing how many pensioners pay income tax.
The growth in average wages and pension points, factors that influence the taxable pension income, can also contribute to the increase in taxable pension incomes.
Regarding the proportion of pensioners paying income tax, rising pension amounts and changes in tax laws could increase the share of taxable pensions. However, the exact proportion of pensioners paying income tax between 2015 and 2024 is not provided here.
According to the latest available figures from 2021, approximately 41% of the 21.9 million pension recipients in Germany paid income tax. This figure represents a 0.74 percentage point increase from 2020. It is worth noting that these figures are from 2021, and as of now, there is no data available for the years 2022 and 2024.
In 2021, around 9.3 million pension recipients in Germany paid income tax. Interestingly, 70% or 282.6 billion euros of the pension payments made in Germany were taxable income.
Since 2015, the average tax rate on pension income in Germany has increased by 15 percentage points. It is important to note that this reform in 2005 led to a higher taxable proportion of pension income, with the tax share increasing as the retirement date becomes later.
The increase in pension payments was higher than the increase in the number of pension recipients, which rose by 0.75% in 2024. This suggests that the average pension payment per recipient has been growing.
In conclusion, while the exact figures and proportions are not yet known for the years 2022 and 2024, it is clear that taxable pension income has likely increased due to rising wages, pension points, and pension benefits. The increasing tax-free allowance and the 2005 reform of the taxation of pension income in Germany have also played a role in these trends. For more precise statistics or detailed tax data, consulting German federal statistical offices (e.g., Destatis) or official pension and tax authority reports would be necessary.
- As the tax-free allowance and average wages continue to rise, following the community policy and employment policy in Germany, it's expected that more pensioners will fall below the taxable threshold, potentially decreasing the proportion of pensioners paying income tax in the future.
- In understanding the increase in taxable pension income, it's crucial to consider not only the growing pension payments but also relevant personal-finance factors such as business income and investments, as these can influence the overall amount of taxable income for retirees.
