Pension: Almost three quarters of pension benefits were subject to income tax in 2025

In Germany, an increasing portion of pension payouts became taxable in 2025, according to the Federal Statistical Office's report. In 2025, 22.5 million individuals received statutory, private, or company pension benefits totaling approximately €423 billion. Of these benefits, €304 billion, or 72%, were subject to taxation. Since 2015, the average tax rate on pensions has risen by 16.4 percentage points.

While the number of recipients increased by only 0.8% compared to the previous year, the amount of payments grew by 5.1%. This trend is due to the gradual shift towards a backdated taxation system, which was legally established in 2005. Under this system, contributions during the savings phase become progressively tax-exempt, while benefits in the payout phase are more heavily taxed.

The later the retirement age, the higher the taxable portion. Additionally, pension increases are fully taxable, further contributing to the rising tax burden. The planned transition period, initially set to end in 2040, was extended until 2058. Only pensions for new birth cohorts will be fully taxed then.