Taxation of Pension Insurance (Rentenversicherung) in Germany
(Besteuerung der Rentenversicherung)

1. What is meant by “Rentenversicherung”?

Rentenversicherung (pension insurance) is the system to which employees and employers pay contributions during working life, and from which a monthly retirement pension (Rente) is paid after reaching retirement age.

There are two main types:

• Statutory compulsory pension insurance:
  gesetzliche Rentenversicherung (GRV)

• Private or supplementary pension schemes:
  such as Riester and Rürup pensions or company pensions (Betriebsrente)

2. Are pensions subject to tax?

Yes – but gradually and depending on the type of pension.

3. How is tax calculated on the statutory pension (gesetzliche Rente)?

The taxable share of the statutory pension depends on the year in which the pension starts. The later the pension begins, the higher the taxable portion.

• The taxable percentage is fixed in the first year of retirement.

• It then applies for the rest of the retiree’s life.

• The tax-free portion is known as the Rentenfreibetrag (tax-free pension allowance).

4. Practical example

• Start of retirement: 2025

• Annual gross pension: 18,000 €

• Taxable portion (85%): 15,300 €

From this amount, various deductions are made, for example:

• the tax-free pension allowance (Rentenfreibetrag),

• contributions to health insurance and long-term care insurance,

• the standard allowance for income-related expenses (Werbungskosten) or other deductible items.

➜ Income tax (Einkommensteuer) is then calculated on the resulting taxable income.

5. Can pension contributions be deducted for tax purposes while working?

Yes.

• Contributions to the statutory pension insurance are automatically deducted from your gross salary and recognised in your tax return as pension-related expenses (Vorsorgeaufwendungen).

• Contributions to a Rürup pension (Basisrente) can often be deducted up to 100% for tax purposes, up to a legal maximum (e.g. 27,566 € in 2025 for single persons, depending on current regulations).

6. Company pension schemes (Betriebsrente)

A company pension (Betriebsrente) in the payout phase is:

• generally fully subject to income tax, and

• additionally subject to health insurance (Krankenversicherung) and
  long-term care insurance (Pflegeversicherung) contributions.

➜ As a result, the net pension income from a company pension can be significantly lower than the gross amount, and in some cases more heavily burdened than the statutory pension.

7. Key terms

• Rentenversicherung – pension insurance

• gesetzliche Rente – statutory retirement pension

• Betriebsrente – company pension / occupational pension

• Riester-/Rürup-Rente – types of private pension schemes

• Rentenfreibetrag – tax-free portion of the pension

• Vorsorgeaufwendungen – tax-deductible retirement and insurance contributions

8. Summary

• Retirement pensions in Germany are generally taxable, but the extent of taxation depends on the type of pension and the year in which retirement begins.

• In 2025, 85% of the statutory pension is taxable for new retirees.

• Private and company pensions (such as Riester or company pensions) are taxable in the payout phase and are often also subject to health and long-term care insurance contributions.

• Pension contributions during working life – both statutory and certain private schemes like Rürup – can typically be deducted from taxable income.

• It is important to check whether you still need to file an income tax return after retirement, especially if your total income exceeds the basic tax allowance.

The editorial team of this website endeavours to provide accurate and reliable information based on thorough research and multiple sources. Nevertheless, errors or incomplete information cannot be entirely ruled out.
Therefore, the contents of this article should be regarded as an initial point of reference only. For binding and definitive advice, please always consult the relevant authorities or a qualified tax advisor.