The German government has announced a series of major changes to the pension system, which will come into effect from 2025. These changes target both the retirement age and the taxation of pensions, as well as the possibility of early retirement. The new rules will have a significant impact on those who are set to retire in the coming years.
According to the new regulations, by 2031, the standard retirement age will gradually increase, reaching 67 years. Thus, people born in 1960 will be able to apply for retirement at the age of 6 years and four months, and those born in 1964 and later will have to wait until 67 years to retire from work.
This measure aims to ensure the sustainability of the pension system, in the context of increasing life expectancy and decreasing birth rates in Germany.
Another significant change is the increase in pension taxation for those who will retire from 2025. They will have to pay tax for 83.5% of the pension, with 0.5 percentage points more than in previous years. It is important to note that this measure does not apply to existing pensioners, but only to those who are set to retire after 2025.
Those who have contributed for 45 years to the pension system will be able to benefit from retirement without deductions. However, the retirement age for this category will gradually increase, reaching 65 years for people born in 1964 and later.
For those who have contributed at least 35 years, there will still be the possibility of early retirement from the age of 63, but with penalties of 0.3% for each month of retirement before the standard age. For example, a person born in 1962, who will turn 63 in 2025 and will have a normal retirement age of 6 years and eight months, will suffer a 13.2% reduction in pension if they opt for early retirement.
In parallel with the penalties for early retirement, Germany also introduces benefits for those who choose to extend their working period after the standard retirement age.
Thus, employees who do not retire immediately after reaching the legal age and continue to work will receive a pension increase of 0.5% for each additional month worked. If a person postpones their retirement by one year, they will benefit from a pension increase of 6%.
For example, an employee with an average salary of 3,780 euros per month, who has contributed to the pension system for 45 years and retires at the standard age, will receive a gross monthly pension of 1,692 euros according to the values set for 2024. If they postpone their retirement by two years, their pension will increase to 1,979 euros, which means an increase of approximately 17%.
