What Brits in Germany need to know about British pensions

Whether it's Scottish football fans, English Oktoberfest enthusiasts, or some Welsh vacationers on a Rhineland wine tour - you're likely to run into a fair few UK tourists in Germany - yet thousands also make Germany their full-time home, including retirees.

According to population data from Germany's Destatis statistical agency, there were just over 83,000 registered British nationals living in Germany at the end of 2023. Just over 20,000 of them - or about a full quarter of all the British citizens living here - are aged 60 or over.

READ ALSO: Where in Germany do all the British citizens live?

Although sunnier destinations like Spain or Portugal might still be the preferred choice for many Brits, UK retirees - like anyone else - might come to Germany for a change of pace, a less rainy climate, cultural offerings, and (relatively) cheaper cost of living combined with higher standard of living.

Some might be living off their pensions alone, or at least have a significant portion of income coming from their pensions. But drawing this income necessarily as easy as it once was - particularly for those coming now - after Brexit.

If you don't have an Article 50 residence permit, you'll now need to apply for a retirement visa and register your residence. You'll also have to take out public health insurance if you don't have available private coverage, with contributions determined based on you having enough of your own income to live on. Note that this calculation will be on any income you have - not just your pension. There's no hard or fast rule on how much you should have in Germany, but you should certainly be taking in more than the poverty line, which is €1,200 a month. 

So how does receiving British pension in Germany work now?

EXPLAINED: Do your pension contributions abroad count in Germany?

British pensions in Germany and Brexit

Germany has social security agreements with over 20 non-EU countries - including Canada and the US. However, the UK isn't one of those countries - at least not yet.

That's because the UK and Germany's common membership in the European Union before Brexit meant that retirees moving between the two had their pensions fall under EU rules. Such a social security agreement was thus not needed before Brexit - and they typically take years to negotiate.

It's not clear if or when a UK-German social security agreement will be drawn up in the future. Until then, pensions between the two countries are governed as much as possible by the Brexit deal, and where necessary - the double taxation treaty Germany has with the UK, which came into effect in mid-2021.

Pension transfers are still possible to Germany from the UK. Image by Rudy and Peter Skitterians from Pixabay

Any contributions made to a British pension scheme by 31 December 2020 are treated exactly the same as they would've been under EU rules, with full entitlement to benefits based on those contributions. Contributions made after 1 January 2021 then fall under the Brexit deal.

This means that someone retiring today from the UK who had worked there for over forty years would still see most of their pension governed by EU rules - with only the contributions made at the very end of their career falling under the Brexit deal. For specific questions, you may wish to consult with a tax advisor of financial planner who specialises in international taxation including the Brexit deal.

Once you figure out what you're entitled to, you can transfer your benefits over.

READ MORE: How can pensioners from abroad retire in Germany?

How do I transfer my UK pension benefits over?

For this, you must first find a Qualifying Recognised Overseas Pension Scheme (QROPS) in Germany that is recognised by HM Revenue and Customs in the UK - and has registered with HMRC. Again, it may be helpful to seek professional advice for this.

You must also have at least €25,000 to transfer. This then sends over your pension entitlement to Germany.

Alternatively, you can transfer your pension to a self-invested personal pension (SIPP), in which you control your own investments, to draw out of upon retirement. The SIPP must be recognised by the UK's Financial Conduct Authority (FCA) and continues to be treated as a UK pension - even if you're living in Germany. The possible upside to this is that a SIPP may make it easier to return to the UK later if you choose to.

How much are British pensions taxed in Germany?

State pensions from any country are treated as earned income by the German system. Therefore, British pensions in Germany are subject to progressive tax rates ranging from 14 percent to 45 percent.

Furthermore, these will generally fall under the British-German Double Taxation Treaty, so if you pay your tax in one country, you shouldn't need to pay it in another. There are cases though where you may need to prove to the other country that you've already paid tax on the income in the other state.

There may also be some specific differences depending on your situation, so be sure to ask for professional advice if you think you need it - and keep all the necessary records.

Please note, we are at The Local are not financial experts. The information above is designed to help, but if you are unsure of what steps to get yourself in order tax-wise, seek professional advice.