Pension & old-age provision

Pension: New pensioners pay more taxes in 2018

Summary

In 2018, the taxable share for people who apply for a pension for the first time will increase. What exactly will change for future retirees and what does this mean for existing retirees? So-called downstream taxation has been implemented since […]

Pension: New pensioners pay more taxes in 2018.  New pensioners pay more tax on their pension in 2018 (source: dpa / tmn / Jens Schierenbeck)

In 2018, the taxable share for people who apply for a pension for the first time will increase. What exactly will change for future retirees and what does this mean for existing retirees?

So-called downstream taxation has been implemented since January 1, 2005. That means that the expenses for the old-age provision will gradually become tax-free. In return, seniors have to pay taxes on their pension income. How high the taxable portion is for the pensioners depends on the year of retirement.

What does this mean for new and existing retirees?

People who retire in 2018 will have to tax 76 percent of their pension income at the personal tax rate. 24 percent of the first annual gross pension remains tax-free as a permanent fixed amount. This amount does not change in the course of life, even if 100 percent of the initial pension payments are gradually taken into account in the tax for later retirees.

For people who are already receiving a pension, this in turn means that their fixed tax-free amount will not decrease in 2018. Pensioners who, for example, received an old-age pension for the first time in 2014 will continue to receive an amount of 32 percent of these first-time payments tax-free.