German retirees are in for some changes in the coming year. The New Year's innovations are never far away, and this time, it's the pension system that's seeing some adjustments.
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These changes will primarily affect age limits, additional earnings limits, and pension taxation. Here's what's in store for German retirees in 2024:
The regular retirement age will be bumped up to 66 years for individuals born in 1958. For younger generations, the natural retirement age continues to rise, with two-month increments. The age of 67 will be reached by 2031.
The age limit for those who can claim the "pension at 63," a perk for those with extended insurance tenure, will be raised to 64 years and 4 months for individuals born in 1960. This age limit gradually increases for subsequent birth cohorts until the 65-year mark is reached in 2029.
Those with extensive insurance tenure can claim a pension without deductions if they've been insured for at least 45 years. However, early utilization is not an option, not even with discounts, for pensioners who meet this criteria.
Changes on the horizon for German retirees in 2024. Image Source:
Simultaneously, the deduction amount for long-term insured individuals opting for the "pension at 63" changes. dictates that a deduction of 0.3% per month will apply if the pension is claimed before reaching the regular retirement age.
Changes in taxation for new retirees starting January 2024
The taxation procedure for new retirees will change from January 2024. Instead of 83%, 84% of the pension will now be subject to tax. This means that 16% of the first full gross annual pension is now tax-free.
The legislative body plans to gradually increase the taxable portion of the pension from 2023, with a half-percent increment. The legislative process for this change is still underway.
Additional earning limits for pensions rise due to reduced employability
From January 2024, the annual minimum additional income limit will be €37,117.50 for individuals receiving a partial disability pension.
For those with full disability pensions, this limit is €18,558.75 per year.
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The upcoming changes in retirement age will affect individuals born in 1958, as the regular retirement age will be increased to 66 years starting in 2024. Those who have been insured for an exceptionally long time, born in 1960, will need to wait until they are 64 years and 4 months old to claim the "pension at 63."
With the changes in taxation procedure for new retirees starting from January 2024, only 84% of the pension will now be subject to tax, with 16% of the first full gross annual pension remaining tax-free.
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In 2024, German retirees can expect several changes in taxation and additional earning limits for pensions. Key updates include:
- Pension Tax-Free Allowance: The allowance is decreasing by 0.5% annually, starting from 16% in 2025.
- Contribution Assessment Ceiling for Social Security Contributions: The contribution assessment ceiling for statutory health insurance has increased to EUR 66,150 annually or EUR 5,512.50 per month, effective from January 1, 2025.
- Contribtion Assessment Ceiling for Statutory Pension Insurance: The contribution assessment ceiling for statutory pension insurance has surged, with a monthly maximum of EUR 8,050 across Germany, effective from January 1, 2025.
- Riester Pension Contributions: The Riester pension contribution is based on 4% of the gross income from the previous year, with a maximum contribution of EUR 1,925 per year, including a state allowance of EUR 175 annually.
- Proposed Tax-Free Retirement Income in Brandenburg: The state of Brandenburg has proposed that pension payments up to EUR 2,000 remain tax-exempt, aiming to alleviate the tax burden on retirees.
- General Taxation of Pensions: Contributions to pension plans are generally exempt from taxes during working years; however, retirees face taxes on their pension income, leading to a significantly increased tax burden for new retirees compared to earlier generations.
