Press
How much money is left to live on in old age? Two resolutions in the growth package benefit pensioners – including the retirement allowance.
Frankfurt – It is worth billions and has some effects: On Friday (March 22nd), the Federal Council approved the traffic light growth package. The focus is on tax relief and bureaucracy for companies. But consumers also benefit from the Growth Opportunities Act – including pensioners in two ways.
The growth package or growth opportunities law
The Federal Council initially thwarted the so-called Growth Opportunities Act and sent it to the mediation committee with the Bundestag. The volume there was reduced from the previously planned seven billion euros to 3.2 billion euros per year. The law remained controversial because, from the Union’s perspective, the federal government wants to finance part of its costs by cutting subsidies for agricultural diesel.
Growth opportunity package: How high is the taxable portion of the pension?
Employees are always asking themselves the same questions: How much money will they have left to live on when they get older? Or: How much would employees have to pay? for a pension of, for example, 1800 euros earn? Many factors play a role here. Of course, also what share of their pensions pension have to pay tax. And that depends on the year in which employees retire. This is where the Growth Opportunities Act comes into play.
- Initial situation: The taxable portion of the pension increases year after year.
- Change due to the growth package: The taxable share increases more slowly than originally planned. An advantage for pensioners.
- From 2023 it will only go up in 0.5 percent increments – actually it was one percent increments.
The income tax assistance association United Payroll Tax Assistance (VLH) explains on its website what this means in concrete terms: “Anyone who retired in 2023 does not have to pay tax on 83 percent, but only 82.5 percent of their pension. This means that the pension allowance increases to 17.5 percent. For those retiring in 2024, the tax rate rises to 83 percent, for those born in 2025 to 83.5 percent, for those born in 2026 to 84 percent and so on.” In 2058, 100 percent would then be reached. Originally, this would have occurred from the time of retirement in 2040.
Growth opportunity package: Additional income from pensioners affected
Another positive aspect for pensioners is the so-called age relief amount. Everyone who is at least 64 years old and has other income in addition to their pension automatically benefits from this. Other income includes, for example:
- Capital gains
- rental income
- wages
What does the relief amount do? This means that a certain part of the income remains exempt from tax. Here, too, “the increase in the tax share will be slowed down retroactively from 2023: instead of 0.8 percentage points per retirement year, this will only increase by 0.4 percentage points annually,” informs VLH. (mbr/dpa)