Emigration's impact on personal pensions explained.

In recent years, the topic of pensions for German expats has gained significant attention. Here's a breakdown of the key points surrounding this issue:

Number of German Pensioners Abroad

Approximately 230,000 German pensioners currently reside abroad, according to the association "Germans Abroad e.V." This number continues to grow as more retirees seek new adventures and lower costs of living overseas.

Tax-Free Portion of Pensions

The tax-free portion of pensions for German pensioners living abroad remains at 16.5 percent. However, it's important to note that this is significantly lower than the 420 euros per month tax-free basic allowance (Grundfreibetrag) that applies to pensioners residing in Germany.

Taxable Portion of Pensions

The taxable portion of pensions for German expats increases by 0.5 percentage points per pension entry year. By 2025, this will amount to 83.5 percent of their pensions being taxable.

Basic Allowance for German Pensioners Abroad

The basic allowance for German pensioners abroad changes, and these individuals are considered "partially taxable" in Germany, according to the Lohnsteuerhilfeverein Vereinigte Lohnsteuer e.V. (VLH). To regain the unlimited tax liability in Germany and have the tax-free allowance apply again, a person must reestablish either a residence or habitual abode in Germany and have been subject to unlimited tax liability for at least 7 years within the last 12 years before moving abroad, counting any interrupted periods cumulatively within these 12 years.

Cost of Living Abroad

Some countries, such as Hungary and Bulgaria, offer a comfortable retirement lifestyle with as little as 1000 euros per month. However, it's crucial to research the local cost of living and healthcare system before making a decision to move.

Popular Destinations for German Expats

Panama and Portugal are particularly suitable for emigration for German pensioners, according to a ranking. These destinations offer favourable tax regimes, good quality of life, and a welcoming environment for expats.

Dignified Life in Old Age in Germany

In Germany, the situation is less favourable for some retirees. Dietmar Bartsch, a Left Party MP, stated that a dignified life in old age is increasingly unattainable for many in Germany. Every fourth person, after 45 years of work, receives less than 1300 euros in pension, according to the Federal Ministry of Labour.

As the number of German expats continues to grow, it's essential to understand the financial implications of living abroad and the potential impact on retirement income. Proper planning and research are key to ensuring a comfortable retirement, whether at home or abroad.