New German Law to Reform Private Pension Savings and Introduce a Retirement Savings Account
Berlin, December 3, 2024 – The German Bundestag (Federal Parliament) has approved a new law that will reform tax-advantaged private pension savings and introduce a new retirement savings account, effective January 1, 2025.
Key Provisions of the Law:
1. Tax-Advantaged Private Pension Savings:
- The existing system of tax-free pension contributions and tax-deferred pension benefits will be replaced with a new system of partially tax-free pension contributions and partially taxed pension benefits.
- Contributions to private pension plans will be tax-free up to a limit of €10,000 per year for employees and €7,000 per year for self-employed individuals.
- Pension benefits will be taxed at a flat rate of 15% when withdrawn, regardless of the number of years of contributions.
2. Retirement Savings Account:
- A new retirement savings account, known as the “Altersvorsorgedepot” (Retirement Savings Account), will be introduced.
- Individuals will be able to contribute to this account on a voluntary basis, with no income limits or contribution limits.
- Contributions to the Retirement Savings Account will not be tax-deductible, but investment returns will be tax-free.
- Withdrawals from the Retirement Savings Account will be taxed as regular income.
Benefits of the Reform:
The new law is expected to provide the following benefits:
- Increased flexibility: Individuals will have more choice and flexibility in how they save for retirement.
- Reduced tax burden: The partially tax-free contributions and partially taxed benefits will reduce the overall tax burden on pension savings.
- Simplified administration: The new system will be simpler to administer for both individuals and pension providers.
Implementation:
The new law will come into effect on January 1, 2025. Existing private pension plans will continue to be recognized under the old system until their maturity dates. However, individuals can choose to transfer their existing pension assets to the new Retirement Savings Account.
Additional Information:
The full text of the new law (in German) is available on the website of the German Bundestag. For more information, please contact the German Ministry of Finance or your financial advisor.
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Drucksachen a new article on 2024-12-03 11:00 titled “20/14027: Gesetzentwurf Entwurf eines Gesetzes zur Reform der steuerlich geförderten privaten Altersvorsorge und zur Einführung eines Altersvorsorgedepots (Altersvorsorgedepotgesetz) (PDF)”. Please write a detailed article on this news item, including any relevant information. Answers should be in English.
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