Field help: Riester pension insurance

Tick this box if you are paying contributions to a state-funded pension provision (Riester contract).

The Riester pension is a privately financed pension funded by the state through bonuses and special expenditure deductions. The funding consists of the pension-savings bonus and, if applicable, a supplementary special expenses deduction.

The decision as to whether the contributions paid can be considered as special expenses depends on whether the tax saving gained from this would be higher than the pension bonus which you are entitled to. The tax office uses the income tax assessment process to determine which option is the most beneficial in your case. This so-called "most favourable rate test" (Günstigerprüfung) is applied to the income tax on "taxable income", firstly without the deduction of contributions as special expenses and then with the deduction.

The difference is the tax saving from deduction of special expenses, which is now compared to the pension bonus amount which you are entitled to. If the tax saving is higher than the bonus, the contributions claimed (plus the bonuses) are deducted up to a maximum amount of 2.100 Euro as special expenses, and the bonus is added to the income tax.

Lohnsteuer kompakt also carries out a most favourable rate test when calculating taxes. So you know whether the special expenses deduction or the bonus is the best choice for you.