Company pensions (company pensions) paid by the former employer or an employer's provident fund are generally regarded as wages and are subject to income tax deduction. If applicable, a pension allowance of a maximum of EUR 3,000 (year of commencement of pension up to 2005) is granted, which is reduced for each new cohort until 2058. For the 2024 cohort, the maximum pension allowance is EUR 1,020, for 2025 it is a maximum of EUR 990. For the individual pensioner, the pension allowance applicable on entry remains the same for the entire duration of the pension payment.
The deduction of the employee lump sum has been abolished from 2005. Instead - as with pensions - the lump sum for income-related expenses of € 102 is deducted.
In order to avoid an excessive burden from the abolition of the employee lump sum during the transitional phase up to 2058, a supplement to the pension allowance was introduced, which will also be reduced by 2058. For existing pensioners and those starting their pension in 2005, the supplement to the pension allowance amounted to EUR 900. For those starting in 2024, the supplement to the pension allowance is 306 euros, and 297 euros for those starting their pension in 2024.
Note
You can also find information on the Retirement Income Act in the "Tax tips for senior citizens".