German Retirement Income Act

The German Retirement Income Act (Alterseinkünftegesetz) is based on a judgement by the German Federal Constitutional Court and includes a shift in deferred taxation. While an additional tax burden is placed on people drawing a pension, those paying contributions benefit from tax relief.

Just like contributions to the statutory pension insurance scheme, contributions paid to the Architects’ Pension Fund (VwdA) are tax deductible, which in turn increases your net income. There is an annual limit, which in 2020 stands at €25,045.80 if you are single and at €50,091.60 if you are married. The proportion of contributions which is tax deductible has been gradually rising from 60% in 2005 and will reach 100% in 2025. The employer contribution is deducted from this. Further information is available from the tax office or a tax consultant. The working-age population is encouraged to use this tax relief as an opportunity to make sure they have sufficient pension provisions for when they retire.

VwdA pension entitlements are generally taxable. The taxable portion of pensions has been gradually rising since 2005 from 50% and will reach to 100% in 2040. For more information on this, please speak to your local tax office or your tax consultant. In any event, the full pension entitlement will be transferred to you less any contributions to your health or long-term care insurance provider. More information can be found under News.

Steuerliche Absetzbarkeit

Abb 1: Steuerliche Absetzbarkeit