Taxation of company pension schemes

If the legal pension If you are poor in old age, you can be happy if you also have income from a company retirement provision feature. However, this income has a bearing on the taxation of the pension.

Taxation as other income

• When it comes to the taxation of pensions, the principle of downstream taxation now applies: as those paid out of income Contributions as pension contributions reduce the taxable income, the pensions achieved are later, that is, "postponed", taxed. This is advantageous in that the pension income is usually lower than the previous income and thus the tax rate is also lower.
• According to § 2 para. 1 sentence 1 no. 7 of the Income Tax Act (EStG) are also subject to "other income within the meaning of Section 22" of the Income Tax Act. According to the regulation in § 22 No. 5 EStG, this other income also includes benefits from contracts for old-age provision, from pension funds and pension funds and from direct insurance.
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• Such a direct insurance comes about, for example, when your employer concludes a direct insurance contract with an insurance company in your favor. This will later pay you the monthly supplementary pension.

Downstream taxation for company pension schemes

• In the case of company pension schemes, the taxation of the amounts paid in - which were previously promoted through tax allowances or special expenses deduction - is made up for later. This results from the reference contained in Section 22 No. 5 Sentence 2 Letter a) EStG to Section 22 No. 1 Sentence 3 Letter a) EStG.


Tax accident pension - this is how you do it right

According to Section 3 (1a) of the Income Tax Act, the statutory accident pension is basically ...

• This standard regulates what is known as downstream taxation, which distinguishes between the start of retirement up to 2005 and from 2006 onwards. From the start of retirement in 2006, the taxable portion of retirement income will be gradually increased from 52 percent (2005: 50 percent) to 100 percent (retirement beginning in 2040). This tax portion applies to the entire period of drawing of the pension or the income from the company pension plan.
• For example, if you retire in 2015, the tax rate is 70 percent. Come on income from the statutory pension insurance and the company pension of 20,000 euros, 14,000 euros (= 70 percent) of this are subject to taxation. The difference of 6,000 euros is considered a tax-free part of the pension. This part no longer changes either, so only these 6,000 euros remain tax-free even in the event of pension increases.

You need to make your own provision for old age. On the one hand, this can be a broad financial provision - and, on the other hand, a healthy lifestyle so that you can still work a little even at an advanced age.