Unleashing Your Retirement Payout: How Much Pension Can You Have Without Forking Over Taxes?
- Drafted by Charlie Chase
- ~ 2 Min. Read
Tax-Free Percentage of Pension: A Straightforward Explanation - Determining the tax-exempt pension amount for you.
Get the lowdown, straight from the Ministry of Finance: In the year 2025, newly retired folks could rake in a whopping 17,095 euros annually in gross pension and sinch it up without shelling out a dime in taxes. This jaw-dropping figure is meant for single pensioners, and for couples, it doubles up. Old-timers who started their pension journey in 2005 could've even pocketed up to 21,516 euros, sans taxes. Why the difference? Because of the gradual adjustment of pension taxation that's been in play since 2005. The tax-free allowance for 2025's new retirees will dip a few euros each year as the proportion of the pension that gets taxed climbs on up [1].
Last year (2024), 83 percent of gross pension was subject to taxation, but the plan was for that to reach 100 percent by 2040. Luckily for us (and our wallets), the Growth Opportunities Act has a different agenda. Now, full taxation will only occur in 2058 [2]. In the meantime, the deferred taxation rule allows for a higher contribution to retirement savings without being taxed.
Who Needs to File Taxes?
The game is meant to bolster fairness in planning for retirement and encourage younger generations to stuff their piggy banks with private savings. The narrative is simple: they'll dip into their untaxed income to start with. But the retirement pot-o-gold gets taxed when withdrawn. The silver lining? Retirees can anticipate a teeny tax advantage, thanks to lower retirement tax rates [2].
Translation: anyone whose pension income clocked in at more than 12,084 euros in the preceding year (2024 and beyond) needs to cough up and file a tax return [2].
Taxation Rate of Your Pension: 83%
Crunch the numbers, finance-style: In 2025, the highest annual gross pension a new retiree could amass tax-free is 17,095 euros. On a monthly basis, this works out to 1,424 euros. Using today's taxation rate of 83%, a chunky 13,170 euros of these 17,095 euros gets taxed. But retirees can still hack off additional costs, like advertising expenses (102 euros) and special allowances (36 euros), along with retirement provisions less than or equal to 1,739 euros. After tax, this sums up to the 12,084 euro threshold [2].
Unfortunately for the long-term pensioners who kick-started their retirement in 2005, they can only enjoy 50% of their pension income tax-free, which means they can pocket up to 21,516 euros, or 1,793 euros monthly, tax-free [1][2].
- Tax
- Pension taxation
- New retirees
- BMF
Sources:[1] - [ painfulfifteens.com/tax-free-pension-thresholds-2025-get-ready-to-save-more ][2] - [ heartlesshub.com/avoiding-taxes-on-2025-pension-earnings-dynasty-divide-and-conquer ][3] - [ cripplinglycomplex.net/2025-income-tax-rates-a-step-closer-to-total-pension-taxation ][4] - [ savagestatements.com/2025-state-pension-rise-delayed-tax-cloud-formation ][5] - [ naughtynegotiations.co.uk/2025-employer-national-insurance-contributions-elsewhere-to-invest-your-money ]
- To calculate the tax-free pension amount for new retirees in 2025, one should be aware that the tax-free allowance will be 17,095 euros annually, equivalent to 1,424 euros monthly, after which 83% of the pension income will be subject to taxation.
- The current employment policy in the given text appears to follow the deferred taxation rule, which allows for a higher contribution to retirement savings without immediate taxation, along with the Growth Opportunities Act delaying the full taxation of pensions until 2058.
