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Does a pensioner have to pay tax on his retirement pension from the statutory pension insurance?

As a result of the Retirement Income Act, civil servant pensions and pensions from statutory pension insurance will in future be treated equally for tax purposes. This will enable the gradual implementation of deferred taxation of retirement income from 2005 onwards. This will apply to life annuities and other benefits from

  • the statutory pension insurance funds
  • the agricultural pension funds
  • Occupational pension schemes and
  • Life annuity insurance policies that only provide for the payment of a monthly life annuity based on the taxpayer's lifetime, which is not paid out before the taxpayer reaches the age of 60. The rights arising from these insurance policies may not be inheritable, transferable, lendable, alienable or capitalizable.

Life annuities also include pensions due to reduced earning capacity and survivors' pensions.

As of 2005, 50 percent of retirement income is subject to taxation. This applies to all existing pensions as well as pensions paid for the first time in that year. The taxable portion of the pension will be increased in steps of 2 percentage points to 80 percent for each new pension year until 2020 and then in steps of 1 percentage point to 100 percent until 2040. The taxable percentage for the 2020 pension cohort will be 80 percent and 81 percent for the 2021 pension cohort . The tax-free portion of pensions will be fixed in perpetuity for each pension cohort. However, it is not a specific percentage that is fixed, but rather an exempt amount that is to be fixed. The tax-free portion is fixed in the year following the first pension withdrawal. If the pension commences before 1.1.2005, the annual amount of the pension in 2005 is decisive.

The tax-free amount does not change in the event of regular pension adjustments.


You can also find information about the Retirement Income Act in the "Tax Tips for Seniors".

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