Delayed Pension Increase 2025: What Retirees Need to Know for July Payments

The upcoming pension increase for 2025 will be higher than in previous years, with a scheduled rise of 3.74% effective July 1, 2025. However, this increase will have a delayed impact for retirees, as they will only experience the benefit of the adjustment starting in August.

In total, over 21 million individuals in Germany will see an increase in their pension payments this summer, resulting in an average monthly boost of approximately EUR66.15. This adjustment raises the pension value to EUR40.79. Despite the positive news regarding the increase, this year presents a unique challenge for pensioners.

Not only will retirees receive the adjusted pension amount, but they will also face a new, higher contribution for long-term care insurance, which was increased by 0.2% in January but will only be deducted from their pensions starting July. The adjustment to the care contribution has created a situation where retirees will have to pay this increase retroactively for the first six months of 2025, as the new rate was only approved in December.

The implications of this situation mean that a portion of the pension increase will be offset by the higher care contribution being deducted. Specifically, retirees will see a 1.4% deduction from their pension to cover the increased care costs for the first half of the year. Consequently, instead of receiving the full 3.74% increase in July, they will experience a net increase of only 2.34%.

For instance, consider a retiree named Angelika, who currently receives a gross pension of EUR950 per month. After accounting for a health insurance contribution of 17% and the previous care insurance rate of 3.4%, her net income stands at EUR836.95. With the increase, her gross pension will rise to EUR985.53 in July 2025. However, with the care contribution now at 3.6% and the additional 1.2% for retroactive payments, a total of 13.3% will be deducted from her pension. This results in a net pension of EUR854.45 for July.

It is important to note that Angelika will receive her adjusted pension amount of EUR866.28 in August, which reflects the full increase without the deductions.

Additionally, the pension increase raises considerations regarding taxation for many retirees. Individuals whose annual income exceeds EUR12,069 will become subject to income tax, which can affect a growing number of retirees as pension adjustments push them above this threshold. However, those newly entering the taxable bracket may find their tax liabilities relatively low.