Pension provision

Which pension contributions can I enter as pension expenses?

Pension expenses refer to contributions to the state pension insurance, the Rürup pension, the agricultural pension fund, and the occupational pension scheme. Employees can enter contributions to agricultural pension funds and contributions to a voluntary state pension insurance.

Since the employer's contribution to the state pension insurance is also included, the special expenses are much lower. Pension expenses can be claimed up to a certain maximum amount. Since 2015, the maximum amount has been linked to the maximum contribution in the miners' pension insurance, rounded up to a full euro amount.

In 2021, pension contributions are deductible up to 25,787 Euro for singles and 51,574 Euro for married couples. However, these contributions only have a tax-reducing effect of 92%, i.e. a maximum of 23,724 Euro or 47,448 Euro.

Other insurance expenses are deductible up to 1,900 Euro in total if the taxpayer receives tax-free subsidies for their health insurance or allowances for medical expenses. If they do not receive these tax-free subsidies, they can claim other insurance expenses up to 2,800 Euro.

(2021): Which pension contributions can I enter as pension expenses?

Which contributions to the statutory pension insurance can I declare?

Contributions to statutory pension insurance, referred to as Deutsche Rentenversicherung Bund and Deutsche Rentenversicherung Knappschaft-Bahn-See since 1 October 2005, are deductible as pension expenses under special expenses.

You can also deduct the following as contributions to statutory pension insurance:

• Mandatory contributions you make as a self-employed person to a statutory pension insurance, e.g. as a craftsman, teacher, educator, carer, midwife, or if you work in a domestic trade.
• If you are voluntarily subject to insurance on your own application.
• If you pay contributions to the Künstlersozialkasse as an artist, journalist, or author, you can declare your own share of the contributions, but not the subsidies from the Künstlersozialkasse.
• As a self-employed person, you can also make voluntary contributions to maintain disability insurance. You can declare these contributions.
• If you voluntarily supplement your training period with contributions to the statutory pension insurance, you can declare these contributions.
• If you compensate for a pension reduction that you would incur if you took your pension early, you can declare the contributions.
• Contributions to a statutory pension insurance abroad are also deductible here.

(2021): Which contributions to the statutory pension insurance can I declare?

How are your contributions to the statutory pension insurance taken into account?

Contributions to the statutory pension insurance consist of the employee and employer share. The employer's share in the statutory pension insurance is also considered deductible pension expenses.

Pension expenses can be claimed as special expenses up to a certain maximum amount, but they only have a tax-reducing effect at a certain deduction rate. This deduction rate is scheduled to increase by 2 percentage points annually until 2025.

In 2021, pension contributions are deductible up to 25,787 Euro for singles and 51,574 Euro for married couples. However, these contributions only have a tax-reducing effect of 92%, i.e. a maximum of 23,724 Euro or 47,448 Euro.

Your contributions to the statutory pension insurance are half paid by your employer, and you pay the rest. From your pension expenses, which are only partially deductible, you must therefore deduct the employer's share completely.

(2021): How are your contributions to the statutory pension insurance taken into account?

When am I compulsorily insured in the statutory pension insurance?

Mandatory members of the statutory pension insurance include:

• All regular employees,
• Insured persons during the three-year child-raising period,
• Employees in marginal employment who do not opt out of pension insurance,
• Public sector employees,
• Disabled employees in sheltered workshops and similar institutions,
• Unemployed persons receiving state support,
• Self-employed persons subject to pension insurance.

Are you exempt from statutory pension insurance?
If you have applied for and been granted exemption from statutory pension insurance, please enter the contributions to a life insurance policy that exempts you from further payments, for voluntary continuation of insurance in the statutory pension scheme, or contributions you pay to the insurance group or pension group of your professional group. You must deduct any tax-free employer contributions or refunds beforehand.

(2021): When am I compulsorily insured in the statutory pension insurance?

What are contributions to agricultural pension funds?

These are contributions paid by a farmer for themselves, their spouse, and possibly for family members working on the farm, to build up their own funded pension scheme. Employees can enter contributions to agricultural pension funds and contributions to a voluntary statutory pension insurance. Contribution subsidies must be deducted.

In 2021, pension contributions are deductible up to 25,787 Euro for single persons and 51,574 Euro for married couples. However, these contributions only have a tax-reducing effect of 92%, i.e. a maximum of 23,724 Euro or 47,448 Euro.

The deduction rate increases by 2 percentage points each year until 2025.

(2021): What are contributions to agricultural pension funds?

What are contributions to occupational pension schemes?

Contributions to occupational pension schemes can be made by members of the liberal professions. This includes, for example, doctors, lawyers and notaries, tax consultants or architects. However, only contributions to such occupational pension schemes whose benefits are comparable to those of the statutory pension insurance provider are accepted. Employees can enter contributions to agricultural pension funds and contributions to a voluntary statutory pension insurance.

In 2021, pension contributions are deductible up to a total of 25,787 Euro for single persons and 51,574 Euro for married couples. However, these contributions only have a tax-reducing effect of 92%, i.e. a maximum of 23,724 Euro or 47,448 Euro.

The deduction rate increases by 2 percentage points each year until 2025.

(2021): What are contributions to occupational pension schemes?

What does "voluntary statutory pension insurance" mean?

Anyone exempt from the statutory pension insurance can make voluntary contributions to the statutory pension insurance and declare these in their tax return. This applies, for example, to the self-employed, civil servants, clergy, or housewives.

(2021): What does "voluntary statutory pension insurance" mean?

How should I declare contributions to the statutory pension insurance as a part-time employee (Minijob)?

A mini job is a form of marginal employment. The condition is that the mini jobber's salary is less than 450 Euro per month. Since 2013, mini jobbers have been subject to compulsory statutory pension insurance. However, they can apply for an exemption. If you do not make use of the exemption, the employer pays the flat-rate contributions to the pension insurance of 15% (in the commercial sector) or 5% (in the household sector), and the mini jobber must pay the difference to the normal pension insurance contribution rate from their own funds.

Since 2008, there has been an option for the mini jobber to claim the employer's contributions and their own employee contributions as pension contributions. If they exercise this option, both the employer's and the employee's contributions are added to the pension contributions.

However, an entry was at least in the past rather disadvantageous for commercial mini jobs. This was because the employer's contribution was initially only partially taken into account and then deducted again at 100%. As the percentage deduction is slowly but surely approaching the 100% mark, this is no longer the case without further ado.

Please enter the employer's contribution to the statutory pension insurance for a marginal employment subject to flat-rate taxation in Lohnsteuer kompakt on the page "Pension expenses > Pension provision > Other compulsory insurances".

(2021): How should I declare contributions to the statutory pension insurance as a part-time employee (Minijob)?

What is a Rürup pension?

Pension models are often named after their inventors. The Riester pension is named after the former Labour Minister Walter Riester. The Rürup pension is named after the economist Hans-Adalbert Rürup. It is very similar to the state pension insurance, but it is funded rather than pay-as-you-go. The money paid into the private Rürup contract is not immediately paid out to pensioners but is saved and earns interest. The official name for the Rürup pension is "private basic pension". The return on this private pension insurance comes from the interest on the contributions by the provider with whom it is taken out.

There is also the advantage that it is tax-advantaged by the state. The aim of the Rürup pension: The insured person receives a monthly pension for life, starting at the earliest at the age of 60. For contracts concluded from 1 January 2012, the insurance contract may not provide for the payment of the annuity before the age of 62. As it is linked to the life of the contributor, this form of insurance is also called an annuity insurance.

A Rürup pension insurance is taken out with a private insurance company. Policyholders pay their contributions monthly or annually, and one-off payments are also possible. They are particularly tax-advantaged.

(2021): What is a Rürup pension?

What forms of Rürup pension are available?

The Rürup policy can be taken out as either a traditional or unit-linked life insurance. In both cases, the entitlement is a monthly pension payment, i.e., the annuity. A traditional life insurance invests the savings portion diversified in the capital market, mainly in bonds. The policyholder receives a profit share from the returns. The guaranteed interest rate was 1.75 percent for contracts concluded between 2012 and 2014, 1.25 percent for contracts from 01.01.2015, and it fell to 0.9 percent on 01.01.2017. From 01.01.2022, it is expected to be only 0.25 percent.

With unit-linked life insurance, the savings amount is invested in investment funds. Therefore, there is no guaranteed interest rate as with the traditional policy. The risk is slightly higher. However, an above-average return is possible. The Rürup pension is also secure in the event of unemployment. Since no money can be paid out before the start of the pension, the savings are not considered disposable assets under the Social Security Code and cannot be seized during the savings phase.

The ongoing contributions and the accumulated capital are also not counted towards unemployment benefit II. During the pension phase, the payments are then, of course, subject to seizure, at least above the non-seizable portion. Until then, periods during which no contributions are made for an extended period do not affect the tax benefits. However, the contract with the insurance company must allow for a contribution pause.

(2021): What forms of Rürup pension are available?

Who is the Rürup pension suitable for?

In principle, a Rürup pension is suitable for anyone who wants to save for retirement with tax benefits. However, it is particularly interesting for those who are not covered by statutory pension insurance and who cannot use a Riester or company pension: for example, the self-employed, freelancers, and business owners. The Rürup funding is also attractive for high earners.

With this type of private pension provision, policyholders do not receive bonuses like with the Riester pension. The state support consists of tax advantages, as Rürup contributions can be claimed as special expenses in the tax return.

However, the tax incentives for contributions are subject to conditions. This is to ensure that the Rürup contract is genuinely used for retirement provision. For example, the monthly pension may not be paid out before the age of 60. For contracts concluded from 1 January 2012, the insurance contract may only provide for the payment of the annuity upon reaching the age of 62. Furthermore, the acquired entitlements cannot be pledged or sold. The tax incentives for the private basic pension relate to the contributions paid, as with other pension insurance schemes. Like payments to the statutory pension fund or professional pension schemes, they can be claimed as special expenses in the income tax return.

(2021): Who is the Rürup pension suitable for?

How can I claim contributions to a Rürup pension in my tax return?

The tax incentives for the private basic pension (Rürup pension) apply to the contributions paid, but maximum amounts apply.

Single persons may deduct the contributions as special expenses - possibly together with contributions to the statutory pension insurance and to the occupational pension scheme - up to a certain maximum amount, although they then only have a tax-reducing effect at a certain deduction rate.

However, it is important to know: There is a transitional phase until 2025, after which the full benefit will be granted by deducting the full contributions.

Why is this the case? The Retirement Income Act of 2005 gradually increases the taxation of pensions. In return, the opportunities for policyholders to deduct their expenses for private retirement provision from their taxes are increasing.

The deduction rate will increase by two percentage points each year until it reaches 100 percent. Thus, the contributions will be gradually more subsidised in the coming years until tax exemption from 2025.

In 2021, pension contributions are deductible up to 25,787 Euro for single persons and 51,574 Euro for married couples. However, these contributions only have a tax-reducing effect of 92%, i.e. a maximum of 23,724 Euro or 47,448 Euro.

In return, the taxation of pension payments will increase until 2040: In the 2010 tax year, 60 percent of the pension from statutory and private insurance is taxed, the rest of the pension is still tax-free. Until 2020, taxation will increase by two percentage points each year and then by one percentage point until 2040. Then both the statutory pension and the Rürup pension, as well as any private provision, will be fully taxed.