Taxes on Private Retirement Pensions (Private Altersvorsorge) in Germany
(Taxation of Private Retirement Provision in Germany)
Private retirement provision refers to any form of retirement saving outside the statutory pension system (gesetzliche Rentenversicherung), including for example:
Riester pension (Riester-Rente)
Rürup pension (Rürup-Rente / Basisrente)
Company pension (Betriebsrente)
Life insurance policies used for retirement (Kapitallebensversicherung)
Long-term investment funds or special savings accounts
| Phase | Tax treatment |
|---|---|
| During the saving phase | Possible tax deductions or relief (for some types like Rürup or Riester) |
| During retirement | The monthly pension / payout is taxable when you receive it |
| During the saving phase | During retirement |
|---|---|
| Contributions are tax-deductible as special expenses (up to 100 %, up to approx. €27,566 in 2025) | The pension payments are generally fully taxable (similar to a regular salary) |
Particularly suitable for self-employed persons and freelancers, because it offers substantial tax relief while you are paying in.
It is usually not inheritable in a flexible way and cannot be withdrawn early as a lump sum.
| During the saving phase | During retirement |
|---|---|
| Contributions are not fully deductible in the classic sense, but you receive state allowances (Zulagen) | Pension payments are fully taxable when you receive them |
Especially attractive for employees in regular jobs with children, as they benefit from annual state bonuses.
| During the saving phase | During retirement |
|---|---|
| Part of the contributions can be exempt from income tax and social security contributions (e.g. via salary sacrifice / Entgeltumwandlung) | The company pension is taxable income and is also usually subject to health insurance and long-term care insurance contributions |
The net pension may be lower than expected because health and long-term care contributions are deducted in retirement.
Payments are usually made as a monthly pension and counted as regular income.
| Time of payout | Tax treatment |
|---|---|
| Generally no special tax deduction while saving | If certain conditions are fulfilled, only 50 % of the profit (gain) is taxable |
The two key conditions are:
Contract duration of at least 12 years, and
Payout not before age 62
→ If these conditions are met, only 50 % of the gain (interest / profit, not the paid-in capital) is subject to income tax.
During the saving phase, contributions are not tax-deductible.
Later, when you withdraw:
Only the capital gains are taxed via capital gains tax (Kapitalertragsteuer) at 25 % plus solidarity surcharge and, if applicable, church tax.
There is an annual Sparerpauschbetrag (tax-free allowance) of
€1,000 for singles
€2,000 for married couples filing jointly
| Type of pension / product | Is a tax return required? |
|---|---|
| Rürup, Riester, company pension | Yes – these are treated as taxable income and must be declared in your annual tax return. |
| Life insurance (one-off lump-sum payment) | Yes – to declare the taxable part of the profit and calculate the correct tax. |
| Private investments / capital gains | Yes – if your gains exceed the annual tax-free allowance or if no withholding tax has been deducted. |
| German term | Meaning in Arabic |
|---|---|
| Private Altersvorsorge | التقاعد الخاص |
| Riester-Rente | معاش ريستر (مدعوم من الدولة) |
| Rürup-Rente (Basisrente) | معاش مستقل مع خصم ضريبي |
| Betriebsrente | معاش عبر الشركة |
| Kapitallebensversicherung | تأمين الحياة المرتبط بالتقاعد |
| Sparerpauschbetrag | الإعفاء السنوي على أرباح الادخار |
| Kapitalertragsteuer | ضريبة الأرباح الرأسمالية (25٪) |
All forms of private pensions are basically taxable when you receive the payments.
Some products offer tax relief during the saving phase (e.g. Rürup pension, company pension schemes).
The Riester pension is supported by the state through allowances, but is fully taxable in retirement.
Certain life insurance contracts are only taxed on half of the gains, provided specific conditions are met.
Once you start receiving private pension income, you should file an annual tax return to ensure all income is correctly declared.
The editorial team of the website aims to provide accurate information based on thorough research and multiple sources. However, errors may occur or some details may be incomplete or not fully verified. Please treat the information in this article as an initial reference only and always consult the competent authorities or a professional tax adviser for binding and up-to-date advice.
