Pension: Almost three quarters of pension benefits were subject to income tax in 2025
Since 2015, the average tax share of pensions has been rising. There are various reasons for this development.
In 2025, nearly three-quarters of pension payouts in Germany became subject to income tax in Germany, according to the Federal Statistical Office. That year, 22.5 million recipients received a total of approximately 423 billion euros in statutory, private, or occupational pension benefits, reported the office. Of these payments, 304 billion euros accounted for 72% of taxable income.
Since 2015, the average tax rate has increased by 16.4 percentage points. While the number of recipients grew by 0.8% compared to the previous year, the disbursed payments rose by 5.1%. This trend is attributed to the gradual shift towards what is known as the "rear-loaded taxation," which was legally established in 2005. Under this system, contributions during the savings phase are increasingly exempt from tax, whereas benefits during the payout phase are more heavily taxed.
The earlier one retires, the higher the taxable portion becomes. Moreover, pension increases are taxed in full, further contributing to the rise in the taxable share. The initial transition period planned until 2040 was extended until 2058 in March 2024. Only pensions of new generations will be fully taxed then.
Written by urgent.news from Handelsblatt's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
