Over two thirds of all pensions were subject to income tax in 2023
Nearly two-thirds of the pensions paid out last year were subject to income tax - significantly more than before. Around 22.1 million people received benefits totaling €381 billion from statutory, private, or occupational pensions, as reported by the Federal Statistical Office on Friday.
This was an increase of 0.6 percent or 121,000 beneficiaries compared to 2022. The amount of pensions paid out increased by 4.9 percent or €17.7 billion. 68 percent of the pension benefits were subject to income tax (€260.5 billion). Since 2015, the average tax rate on pensions has increased by 13 percentage points.
"The reason for the increase in the tax rate is the reform of the taxation of pensions in the Pension Income Tax Act of 2005," explained the statisticians. The core element of this reform is the transition from a pre-payment to a post-payment taxation of statutory pensions. This makes pension contributions tax-free during the accumulation phase and taxes the benefits during the payout phase.
With the entry into force of the so-called Growth and Jobs Act last March, the transition phase, which was previously scheduled to end in 2040, was extended to 2058. "The proportion of pension income that is taxable depends on the year in which the pension begins," said the statisticians. "The later the pension begins, the higher the taxed proportion of pension income." Furthermore, the tax rate increases with pension increases, as these are fully taxable.
The total income tax paid on pensions last year amounted to an impressive sum of €260.5 million, represented in millions. As stated by the statisticians, the taxed proportion of pension income tends to increase with delay in pension commencement.
