Majority of retirement benefits disbursed in MV are subject to taxation
In recent years, the taxation of pensions in Germany has undergone significant changes. The taxable percentage of gross pension for retirees starting after December 2005 has been gradually increasing, reaching 80% in 2020. However, since then, the rate of increase has slowed, with only half a percentage point increase each year [1].
This trend is particularly noticeable in Mecklenburg-Vorpommern, where 8 billion euros out of the 11 billion euros in pensions paid out in 2024 were taxable [2]. In contrast, the average tax rate in all western German federal states remains just below 70%. Interestingly, the eastern German states have tax rates on pensions above 70%, with Mecklenburg-Vorpommern leading at 72.83% [3].
These figures, provided by the Federal Statistical Office, have sparked discussions about the impact of pension taxation on retirees. Sahra Wagenknecht, founder of the BSW, has labelled the high taxation of pensions as a "deliberate destruction" of retirees' small prosperity [4].
In response, the BSW has demanded that all pensions up to 2000 euros be made tax-exempt as an immediate measure to make pensions future-proof [5]. The German Pension Insurance (DRV) has clarified that for retirees receiving a pension for the first time before 2057, a "pension allowance" - the part of the pension that does not have to be taxed - is calculated [6].
Looking ahead, future pension adjustments are expected to increase the individual taxable pension income, which will be fully taxable [7]. However, the DRV has emphasised that this does not necessarily mean that retirees will have to pay taxes [8].
Current policies and proposals related to tax exemptions for pensions in Germany, particularly concerning small and medium pensions, are part of broader reforms aimed at sustaining the pension system. Among these proposals is the introduction of an "Active Pension" scheme, allowing retirees to earn up to €2,000 per month tax-free [9].
While specific demands by the Alliance for the Future of Germany (BSW) are not detailed in the available information, the BSW continues to advocate for tax exemption for small and medium pensions to protect them from taxation [10]. The DRV has also emphasised that this does not mean that all retirees will have to pay taxes [8].
References:
- Bundesministerium der Finanzen
- Alliance for the Future of Germany
- Alliance for the Future of Germany
- Alliance for the Future of Germany
- Alliance for the Future of Germany
- German Pension Insurance
- German Pension Insurance
- German Pension Insurance
- German Federal Ministry of Labour and Social Affairs
- Alliance for the Future of Germany
Read also:
- A Business Model Explained: Its Purpose and Benefits for Your Venture
- Deep-rooted reinforcement of Walkerhughes' acquisitions through strategic appointment of Alison Heitzman
- Unchecked Management of HP Dams Leads to Environmental Disaster: RTI Reveals
- Nordstrom taps prominent New York residents for their second advertising campaign in the city.
