The future remains uncertain. That much is certain. Apart from that, there are also many innovations and laws to come in the new year. These changes in the pension then become important, as the North Rhine-Westphalia consumer advice center informs.
Stock pension still planned
The new federal government wants to change the pension system so that the statutory pension will no longer be fully financed on a pay-as-you-go basis. So far, the young people have paid the old people’s pensions with their contributions. Because demographic change means that there are more and more old people and fewer young people, this system is threatened with collapse. Therefore, in the future, the old-age provision should be partially funded. Then a part (probably 2 to 3 percent of the pension contribution) should be automatically paid into a “permanent fund”. This is then to be managed professionally and globally by an independent public body. The fund should be “permanently property-protected” for the contributors; according to the plans of the traffic light coalition, the state has no access to the contributions paid.
The contribution rate in the statutory pension insurance will continue to be 18.6 percent in the general and 24.7 percent in the miners’ pension insurance from January 1st.
Age limits are raised
In 2012, the retirement age started to increase. In the course of the gradual increase in the retirement age in the statutory pension insurance (“pension at 67”), the age limits increase by a further month. Insured persons who were born in 1956 or 1957 and for whom no confidentiality protection regulations apply reach the standard retirement age at 65 years and ten months or at 65 years and eleven months.
For the following birth cohorts, the standard retirement age initially increases by a further month; From 2024, the age limit will be raised in 2-month increments, starting with those born in 1959. For insured persons born in 1964 or later, the standard retirement age of 67 years applies.
Contribution assessment limits increase
From January 2021, the monthly contribution assessment limit West will increase from EUR 7,050 to EUR 7,300 (EUR 87,600 annually). In the east, on the other hand, it rises to 7100 euros per month (2020 6750 euros); that’s 85,200 euros a year. Up to these income limits, employees must pay contributions to pension and unemployment insurance in the next year.
In the miner’s pension insurance West, the monthly contribution assessment limit increases to 8,950 euros per month (2022: 8,650), which is 107,400 euros per year. In the east, it rises to 8,700 euros per month – this is 104,400 euros per year (2022: 8,350 euros).
Limited additional income limit is abolished
Until now, anyone who retires earlier and earns something extra had to make sure that certain limits were not exceeded – otherwise the pension would have been reduced. This additional earnings limit will be completely abolished in 2023. If you retire from the age of 63, you can earn as much as you want in addition to your pension. The regulation applies to people who retire with 35 years of contributions but have not yet reached the standard retirement age.
During the last two Corona years, the additional earnings limit for early retirement pensions was significantly higher than in the years before. Instead of 6300 euros, early retirees were allowed to earn up to 46,060 euros a year. With the complete abolition of the additional earnings limit, the legislator now wants to counter the shortage of skilled workers and make the transition from working life to retirement more flexible.
However, the additional earnings limit will not be abolished for all those who receive a full or partial disability pension. However, the additional earnings limit for disability pensioners will be increased. In the case of a full disability pension, it will be raised from the current EUR 6,300 to EUR 17,272.50. Anyone who is only partially disabled must have their additional income limit calculated individually by the pension insurance. In 2022, however, the limit is at least 15,989.40 euros per year. This value is also expected to increase in 2023. More than twice as much to 34,545 euros.
Average earnings for pension points
The average salary in the pension insurance, which is used to determine the salary points in the respective calendar year, is provisionally set at 43,142 euros per year for 2023 (2022: 38,901 euros). Read here how the pension is calculated.
Improved protection in the event of reduced earning capacity
Anyone who becomes less able to work at a younger age has generally not yet been able to build up sufficient pension entitlements. To ensure that the insured nevertheless receive adequate security, recipients of a disability pension are treated as if they had continued to work as before after the disability occurred (additional period). The qualifying period will be gradually extended to 67 years by 2031, based on the raising of the standard retirement age. If the disability pension begins in 2023, the qualifying period ends at the age of 66.
Planned pension increase
From July 1, pensions are expected to increase by 3.5 percent in the west and 4.2 percent in the east. This is what the federal government’s draft of the 2022 pension insurance report says. The adjustment should apply to all old-age pensions, pensions for reduced earning capacity and surviving dependents, statutory accident pensions and pensions for farmers from the agricultural pension fund.
If the estimated pension increase remains, a monthly pension of 1000 euros, which is based only on western contributions, will increase by 35 euros on July 1, 2023, and an equally high pension with eastern contributions will increase by 42 euros. The pension adjustment will finally be decided again next spring when the exact figures of the wage statistics are available.
Pension adjustment of East and West
Also on July 1, the next step will be taken to align the pension value in East Germany with the pension value in West Germany. From the current 98.6 percent, the East pension value then rises to 99.3 percent of the West value. On July 1, 2024, it will then be further adjusted by 0.7 percentage points, so that the pension will then be calculated uniformly in all federal states for the first time. This is what the Pension Transition Completion Act provides for, which heralded the first step towards adjustment on July 1, 2018. In return, the current higher assessment of wages for calculating pensions in the East is to be lowered – also in seven steps. With this higher rating, the calculation of pensions is currently used to compensate for the fact that wages in eastern Germany are lower on average.
The current pension value determines how much monthly pension insured persons receive if they pay contributions based on average income for a calendar year. This means that the current pension value is the value of a payment point in the statutory pension insurance, expressed in euros; it is currently 36.02 euros in the west and 35.52 euros in the east. In order to allow pensioners to regularly participate in wage developments in Germany, the current pension value is adjusted accordingly on July 1 of each year. Since the average income in the east has so far been below that in the west, there is currently still the current pension value (east), which is adjusted according to the wage development in east Germany.
Tax share for new pensioners increases
From January 1st, the taxable portion of the pension will increase from 82 to 83 percent for new pensioners born in 2023. This means that only 17 percent of the first full gross annual pension remains tax-free, as the taxpayers’ association explains. All pensions beginning in 2040 or later will then be 100 percent taxable. In the case of existing pensions, the fixed tax-free pension amount remains. Since 2005, pensioners have had to pay tax on part of their retirement benefits. The tax-free allowance has been reduced annually since then.
The background to the dynamic pension taxation is the conversion of taxation to a downstream system. This means that the contributions to the pension insurance can be deducted from tax during the working life and the pension must be taxed in the payment phase.
Minimum contribution in the statutory pension insurance
Anyone who voluntarily pays into statutory pension insurance in the coming year can choose any amount between the minimum contribution of 96.72 euros and the maximum contribution of 1357.80 euros per month. Read here why paying voluntary contributions can make sense.
