Taxing company pension: You should know that

You have been entitled to a company pension since 2002, but you must also pay tax on it if you retire from work and receive a pension. We have researched for you what you should know about the tax on additional pensions.

Taxing company pension: There are many types of company pension

• How the company pension is taxed depends largely on how it is structured. A direct commitment or a provident fund are no longer as common as a company pension model.
• The pension fund, direct insurance or a pension fund are other ways of occupational pension provision. Direct insurance, for example, is only a classic life insurance policy, but the boss is the policyholder.

Current pension allowance for the company pension

The tax-reducing pension allowances for pensioners are to be lifted completely by 2040.

• In 2005, there was still an allowance of 40 percent or a maximum of 3, 000 euros. This allowance will be reduced by 1.6 percent annually until 2020.
• For 2018, a pension allowance of 20.4 percent or a maximum of 1, 535 euros applies.
• Between 2021 and 2040 there will be an annual reduction of 0.8 percent, so that in the end the tax-reducing allowance will no longer apply.
• We explain in a separate article how you apply for the company pension.

Taxation of company pensions - many detailed regulations

It cannot be said uniformly how a company pension is taxed.

• If you have already paid wage tax on the accruing company pension, only tax in the amount of the income portion of the pension is due.
• If the pension was financed from tax-free contributions, it will be taxed 100 percent later.
• What is often not considered in old-age provision is a regulation that has been in effect since 2005. Since then, pensioners have been obliged to pay general social security contributions from their company pension.
• Both the employee and the employer share are calculated. Currently (as of 2018), around 18 percent of the company pension goes to health and long-term care insurance.
• If you would like to calculate your company pension, you will find the necessary formula here.

You can find out in our next post whether you can cancel a company pension.