Contributions and taxes on pensions: how much net remains of the gross?

Statutory pension, Riester pension or company pension – the same applies to retirement benefits: gross is not the same as net. However, the deductions for retirees in 2021 are not quite as high as for employees. An overview.

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  • Statutory pension: Health insurance and long-term care insurance
  • Statutory pension and tax
  • Company pensions: Health insurance and long-term care insurance
  • Company pensions and taxes
  • Riester pensions and tax
  • Riester pension and health insurance
  • Rurup pensions
  • Other private pensions
  • Disadvantages of voluntary health insurance in old age
  • "Child regulation" can help voluntarily insured persons into the KVdR
  • Table: Overview of taxation of retirement income

Statutory pension: Health insurance and long-term care insurance

Around 11 percent of the gross pension goes to health and long-term care insurance. Retirees, like employees, have a free choice of health insurance fund.

If you have statutory health insurance, you must pay health and long-term care insurance contributions from your statutory pension – just like employees do. You no longer have to pay contributions to unemployment insurance and pension insurance.

The general health insurance contribution of 14.6 percent is shared with the pension insurance. You pay the insured person’s share of 7.3 percent. The same applies to the additional contribution, which varies from fund to fund and will average 1.3 percent in 2021. As an insured person, you will have to pay an additional 0.65 percent on average for this.

You are responsible for the nursing care insurance contribution, which is currently 3.05 percent. For childless persons, 0.25 percentage points more. The bottom line for insured persons with children: In 2021, an average of 11 percent of their statutory pension will be transferred to social security. For insured persons without a child, the rate is 11.25 percent.

Long-term care insurance: When do you count as an insured person with a child??

For the purposes of long-term care insurance, you are still considered an "insured person with child" even if your child – for example – is 40 years old or older. In contrast to other social benefits, it does not matter whether the children are still entitled to child benefit. As a rule, it is also not decisive whether the children are the employee’s own children or the children of the spouse. However, stepparents or adoptive parents must pay the premium surcharge if the (only) child was already of age at the time of adoption or marriage, respectively. has exceeded the age limit for non-contributory (child) family insurance or if a stepchild has never lived in the same household as the current pensioner.

Example: Deduction health insurance and nursing care insurance

With a gross pension of 1.500, as an insured person with a child you must reckon with deductions of 165 euros on average from your gross pension. This means that after deducting social security contributions, you are left with only (1.500 – 165 = ) 1.335 Euro.

The payment method for the insurance contributions is different. If you – like most pensioners – are compulsorily insured, the pension insurance deducts the contributions from your pension and transfers them to the social security funds.

Voluntarily insured persons, on the other hand, pay the entire contribution (including the contribution to long-term care insurance) to their health insurance fund themselves. In addition to the (gross) pension, the pension insurance will transfer the "employer’s contribution", i.e. half of your complete contribution for health insurance.

Example: Social insurance for voluntarily insured persons

Your gross pension is 1.500 euros. In addition, the pension insurance company will pay you the "employer’s contribution" to the statutory health insurance, i.e. 7.85 percent. That is 117.75 euros. This means that you will have to pay a total of 1.617.75 euros transferred. You are responsible for paying the contribution to the health insurance – which in this case is at least 235.50 Euro.

The procedure is very similar if you have private health insurance. Even then, the statutory pension insurance contributes to the health insurance contributions. However, the amount of the private insurance contribution is not decisive. Instead, the same amount is paid as for voluntarily statutorily insured persons – with one difference: the average additional contribution of the statutory health insurance (GKV ), which is determined in advance by the Federal Minister of Labor on the basis of estimates, is generally taken into account as additional contribution. 2020, this amounts to 1.1 percent.

Free choice of insurance fund also for pensioners

If you have statutory health insurance, you will continue to be insured with your previous statutory fund even after you retire. Just like employees, however, you have a free choice of health insurance fund.

In general, however, there is a commitment period for all statutory pension funds. Since the beginning of 2021, this has only been twelve months. This means that every insured person must remain loyal to his or her insurance fund for at least twelve months – normally. There is a special right of cancellation during this period only if the contribution rate is increased. In this case, a special right of termination applies for two months.

Statutory pension and tax

Each new pensioner cohort is taxed more heavily. Mostly the treasury does not collect however too much. Because the incomes are consistently smaller in the age than in the working life.

The Federal Ministry of Finance expects that in 2021, around 5.37 million of the total of more than 20 million pensioners will have to pay taxes of. That goes from an answer of the Ministry to a question of the left of 13. November 2020. Most of these are pensioners who receive other pensions in addition to their statutory pension or have other taxable income.

But in the meantime, even single people who retire at the beginning of 2021 and receive a gross pension of 1.200 euros – i.e. before deduction of social security contributions – can expect a low annual tax burden of 28 euros. With a monthly pension of 1.500 euros, you will already have to pay 454 euros a year.

But beware: this only applies to single pensioners, who have no deductible expenses other than social security contributions and the tax-free allowances that apply to everyone. And furthermore, only for new pensioners who draw a retirement pension for the first time in January 2021.

Whether and how much tax you have to pay from your pension depends on when you have retired or will retire. Since 2005, the taxable portion of the pension has been increasing year by year. In return, employees’ social security contributions are increasingly exempt from taxation. The principle is called deferred taxation.

The transition to this principle will take several decades. For those who have already retired in 2005, 50 percent of the pension received in 2005 is tax-free. Currently – as of 2020 – 80 percent of the gross pension of a new pensioner is taxable . From 2021 onwards, one percentage point will be added to this tax bracket each year. In 2025, 85 percent of the pension will be taxable for new pensioners of that year. The taxable portion then increases by another point each year.

If you retire in 2040 or later, you will have to pay tax on your full statutory pension.

More on pensions and taxes

The calculation is as follows: Let’s assume you retired in January 2020 and have a total gross pension in 2020 of 18.000 euros related. Of this amount, 80 percent is taxable. 20 percent is tax-free, which is 3.600 euros. This amount initially only applies to the tax return for 2020. Your final tax-free amount is not determined until the year after you retire. Let’s assume that your annual pension in 2021 is increased to 18.200 Euro increases. 20 percent of this is 3.640 euros. You must then remember this amount for the future. Because in the future this will be your tax allowance . Of the pension you receive in 2021, you must pay (18.200 – 3.640 =) 14.560 euros tax.

Further pension increases in the following years are fully taxable for you . If, for example, your pension increases by a further 1 by 2025, you will have to pay tax on it.500 euros, the taxable portion of your pension will then rise to (14.560 + 1.500 =) 16.060 euros. However, due to the simultaneous increase in the basic tax allowance, this has little effect in most cases.

The tax authorities do not apply this part of your income

Taxable income up to the amount of the basic tax allowance remains tax-free for you. The tax-free amount in 2021 is 9.744 euros. You still have to add

  • a special expenses allowance of 36 euros,
  • a lump sum for income-related expenses of 102 euros (for pensioners),
  • Their full contributions to social insurance (health and long-term care insurance),
  • Your personal pension allowance.
  • Tip: Partial pension secures favorable taxation percentage
    According to the Federal Ministry of Finance, the percentage that counts when calculating the pension allowance "depends on the year in which the pension begins". This also applies when drawing a partial pension. This means, for example: Anyone who draws a pension for the first time in 2021, but chooses a partial pension – which can also be a 10 percent pension – thus locks in the value applicable for 2021 on the "tax ladder" for the future. If you then switch from a partial pension to a full pension in 2024, for example, you will stop on the tax staircase in 2021. When it comes to pension taxation, "the percentage originally calculated is decisive," according to a circular issued by the Federal Ministry of Finance.

Pension insurance company sends tax certificate

On request, the German Pension Insurance will issue pensioners with a free certificate to help them fill out the tax forms "Annex R" and "Annex Pension Expenses" of their tax return. You can request the certificate by letter, fax or e-mail from your pension insurance provider. Important: Specify your personal pension insurance number when doing so. If you have applied for the certificate once, it will be sent to you automatically in each of the following years.

For more information, please refer to our "Pensions and taxes" section

Company pensions: Health insurance and long-term care insurance

A considerable part of the company pension is deducted as a contribution to health insurance and nursing care insurance. Since the beginning of 2020, however, somewhat less than before. In terms of tax, there is a patchwork of regulations. In general, those who have benefited from favorable tax regulations as contributors will be asked to pay more in old age. And vice versa.

Around 60 percent of employees are additionally covered by a company pension in old age. This also includes the so-called direct. All company pensions – with the exception of company Riester pensions – are subject to both health and long-term care insurance contributions.

Since the beginning of 2020, however, an allowance of one twentieth of the monthly reference amount applies. Since this 2021 to 3.290 euros, a higher tax-free amount of now 164.50 euros also applies. This is adjusted annually. This means: If you are entitled to a company pension of 300 euros gross per month, only 135.50 euros of this is subject to health insurance contributions. On average, 15.9 percent of students fail this exam. This is 21.54 euros. Since the allowance applies only to health insurance, but not to long-term care insurance, 300 euros of the latter are still subject to contributions.

The allowance applies to all occupational pensions in total – and additionally to income from self-employment.

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