What are the tax implications of converting capital assets into pension claims?
August 9, 2022 | 40,00 EUR | answered by Anna Karpinski
Dear tax advisor,
My name is Paula Waldmüller and I am currently looking into converting my capital assets into pension entitlements. I intend to convert a portion of my assets into a lifelong pension to create a regular source of income for my future. However, I am unsure of the potential tax implications of this conversion and how best to proceed in order to avoid tax pitfalls.
Currently, I have a substantial amount of capital assets that I would like to invest in the long term in a secure manner. The idea of converting a portion of it into pension entitlements is appealing to me, as it could provide some financial security for my retirement. However, I am not certain how such a conversion would be treated from a tax perspective and whether there may be tax advantages or disadvantages.
My concern is that I may have to bear unexpected tax burdens or restrictions when converting my capital assets into pension entitlements. Therefore, I would be very grateful if you could assist me and explain the potential tax implications of converting capital assets into pension entitlements. Are there specific tax regulations or optimization possibilities that I should consider?
Could you provide me with possible solutions to optimally convert my capital assets into pension entitlements from a tax perspective? I would like to ensure that I fulfill my tax obligations while also taking advantage of tax optimization opportunities.
Thank you in advance for your help and support.
Sincerely,
Paula Waldmüller
Dear Mrs. Waldmüller,
Thank you for your inquiry regarding the conversion of your capital assets into pension claims and the associated tax implications. It is understandable that you are thinking about the best way to proceed in order to avoid tax pitfalls and optimize your financial future.
The conversion of capital assets into pension claims can indeed have tax implications that need to be considered. Generally, pension payments from a private pension insurance are subject to taxation. The taxable portion of the pension is determined based on the so-called yield fraction, which depends on your age at the start of the pension payment. The older you are, the lower the taxable portion.
However, there are also tax benefits that you can take advantage of when converting into pension claims. For example, you can deduct contributions to private pension insurance as special expenses for tax purposes. The possibility of a tax-free capital payout at the start of the pension or the tax advantages of Riester pensions are aspects that may be relevant to you.
To advantageously convert your capital assets into pension claims from a tax perspective, I recommend seeking advice from a tax advisor or financial expert. Together, you can analyze your financial situation, explore tax optimization opportunities, and develop an individual strategy that aligns with your needs and goals.
It is important to fulfill your tax obligations, but also to take advantage of tax optimization opportunities to secure your financial future to the best of your ability. A professional advisor can help you make the right decisions and avoid tax pitfalls.
I hope that this information has been helpful to you and I am available for any further questions you may have. Thank you for your trust and I wish you success in converting your capital assets into pension claims.
Sincerely,
Anna Karpinski
