... with the pension?

The future remains uncertain. That much is certain. Apart from that, however, there are many changes and laws to come in the new year. These changes to pensions will then become important, as the German Pension Insurance, among others, informs us.

Regular age limit rises to 66

The regular retirement age will rise to 66 at the beginning of next year. This applies to insured persons born in 1958. For those born later, the entry age will continue to rise in 2-month increments. The regular age limit of 67 will then be reached in 2031.

The age limit for "retirement from 63" increases

For the old-age pension for particularly long-term insured persons, known as the "pension from 63", the age limit for those born in 1960 will rise to 64 years and 4 months. For those born later, the entry age will continue to rise until 2029, when the applicable age limit of 65 will be reached. Anyone who has been insured in the statutory pension insurance scheme for at least 45 years can claim the old-age pension for particularly long-term insured persons without deductions. Early claiming, even with deductions, is not possible for this type of pension.

13 common misconceptions about the pension, read here.

Reduction for new "pensions for long-term insured persons" continues to rise

Anyone who has been insured in the statutory pension insurance scheme for at least 35 years can claim the old-age pension for long-term insured persons from the age of 63. The old-age pension is subject to a deduction. This amounts to 0.3 percent for each month that the pension is claimed before the regular retirement age is reached. As the regular retirement age will gradually rise to 67 by 2031, the deduction will also increase if this pension is taken as early as possible. For insured persons born in 1961 who will turn 63 next year, the standard retirement age is 66 years and 6 months; if they take their pension at the earliest possible age of 63, the deduction is 12.6 percent. For insured persons born in 1960, the maximum deduction was still 12.0 percent.

The contribution rate remains stable

There will be no change to the contribution rate for statutory pension insurance. This will remain stable in the coming year at 18.6 percent.

Contribution assessment thresholds rise, ...

In 2024, the contribution assessment ceiling for pension insurance will rise from €7300 to €7550 per month in the old federal states and from €7100 to €7450 per month in the new federal states. It determines the maximum amount up to which earned income is taken into account when calculating pension insurance contributions. No contributions are paid for income in excess of this amount.

In the miners' pension insurance scheme, the income limit in the new federal states will increase to €9,200 per month (2023: €8,750/month). In the old federal states, it will be 300 euros per month (2023: 8950 euros). Employees in the mining industry are insured under the miners' pension insurance scheme. It takes into account the special health demands placed on miners.

... Reference values as well

The reference value will increase in 2024 in the old federal states from 3395 euros to 3535 euros per month. The reference value (East) will rise from 3290 euros to 3465 euros per month in the new federal states. Among other things, it is important for the calculation of pension insurance contributions for self-employed persons subject to compulsory insurance.

2024 will be the last year with different contribution assessment thresholds and reference values for the old and new federal states. From 2025, a uniform contribution assessment ceiling and a uniform reference value will apply in western and eastern Germany.

Improved protection in the event of reduced earning capacity

The amount of a reduced earning capacity pension is calculated on the basis of the insurance periods completed to date. In addition, people with reduced earning capacity are placed in the same position as if they had continued to work and pay contributions on their previous average income through the so-called additional qualifying period. This means they receive a higher pension. Since 2019, the extent of the additional qualifying period has been adjusted to the regular retirement age. This will gradually rise to 67 by 2031. If you start your pension next year, the supplementary period will therefore end at 66 years and 1 month instead of 66 years.

Increased supplementary income limits for pensions due to reduced earning capacity

The supplementary income limits for pensions due to reduced earning capacity will increase in 2024. If you receive a pension due to a partial reduction in earning capacity, the minimum annual supplementary income limit from January will be €37,117.50; for pensions due to a full reduction in earning capacity, it will be €18,558.75.

Average earnings for pension points

The average earnings in pension insurance, which are used to determine the earnings points in the respective calendar year, are provisionally set at 45,358 euros per year for 2024 (2022: 43,142 euros). You can read how the pension is calculated here.

Planned pension increase

From July 1, 2024, pensions are expected to rise by 3.5 percent nationwide. This is stated in the Federal Government's draft pension insurance report 2023. The adjustment applies to all old-age pensions, reduced earning capacity pensions, survivors' pensions, statutory accident pensions and farmers' pensions from the agricultural pension fund. The final decision on the pension adjustment will be made next spring when the exact figures from the wage statistics are available.

Pension adjustment for East and West

The next step will also be taken on July 1 to bring the pension value in the east into line with the pension value in the west. The eastern pension value will then rise from the current 98.6 percent to 99.3 percent of the western value. It will then be adjusted by a further 0.7 percentage points on July 1, 2024, so that pensions in all federal states will be calculated uniformly for the first time. This is provided for in the Pension Transition Final Act, which heralded the first step towards the adjustment on July 1, 2018. In return, the current higher valuation of wages for calculating pensions in the east is to be reduced - also in seven steps. This higher valuation is currently used in the calculation of pensions to compensate for the fact that wages in the east are lower on average.

The current pension value determines how much monthly pension insured persons receive if they pay contributions for a calendar year based on average earnings. This means that the current pension value is the value of one earnings point in the statutory pension insurance scheme expressed in euros, currently 36.02 euros in the West and 35.52 euros in the East. In order to ensure that pensioners regularly participate in wage developments in Germany, the current pension value is adjusted accordingly on July 1 of each year. As average incomes in the East have so far been lower than in the West, the current pension value (East) is currently still adjusted in line with wage trends in East Germany.

Tax rate increases for new pensioners

New retirees in 2024 will have to pay tax on a higher proportion of their pension. From January 2024, the taxable pension share will increase from 83% to 84%. This means that 16% of the first full gross annual pension will remain tax-free. Existing pensions are not affected by this.

The legislator intends to increase the taxable pension component retroactively from 2023 only in steps of half a percentage point each. However, the corresponding legislative process has not yet been completed.

Minimum and maximum contributions for voluntary insurance increase

The minimum monthly contribution for voluntary insurance in the statutory pension insurance scheme will increase from €96.72 to €100.07 from January 1, 2024. The maximum amount will rise from 1357.80 euros to 1404.30 euros per month. Voluntary contributions to the statutory pension insurance scheme can be paid by anyone who is resident in Germany, is at least 16 years old and is not compulsorily insured in the statutory pension insurance scheme.

Under the above-mentioned conditions, Germans resident abroad can also pay voluntary contributions. Persons who have reached the standard retirement age and receive a full old-age pension are excluded from voluntary insurance. There are no differences for voluntary insurance in the old and new federal states. You can read here why it can make sense to pay voluntary contributions.

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Many consumers are wondering about the implications of these changes on their tax return.For those who engage in stock trading, the age limit for withdrawing profits from their pension fund without penalty will also increase next year.Advisors recommend reviewing pension policies in light of these changes to ensure optimal provision for retirement.German Pension Insurance has advised that pensioners who claim their pension at age 63 in 2024 will face a higher deduction due to the increase in the regular retirement age.Private pension provision may need to be adjusted to accommodate these changes, such as increasing contributions to compensate for the higher deduction.With the turn of the year, the contribution assessment thresholds and reference values for pension insurance will also change, impacting self-employed individuals subject to compulsory insurance.Pension policy analysts are predicting a planned pension increase of 3.5% from July 2024 for various pensions, including old-age pensions, survivors' pensions, and farmers' pensions.

Source: www.ntv.de