[Germany] Government to introduce tax-free ‘active pension’ to retain retirees

The German government is set to introduce an ‘active pension’ from January 1, 2026 which allows individuals who choose to work past the statutory retirement age to earn up to €2,000 per month tax-free, Personnel Today reports.

Labour minister Bärbel Bas called the Aktivrente (active pension) an incentive intended to keep experienced workers in the labour market. 

The scheme was reportedly part of Christian Democratic Union chancellor Friedrich Merz’s campaign when he was elected in February 2025.

Ms Bas said, “Anyone who voluntarily wants to work longer needs attractive conditions”, and stated that the government would lift the ban on prior employment, which had prevented retirees from simply returning to their former places of work.

Over the next decade, around 9 per cent of Germany’s population is due to retire. A prospect which has made urgent action essential.

“It is counterproductive that employees who wanted to continue working after reaching retirement age were not allowed to return easily to their old employer,” Ms Bas said.

The active pension will be available to most working people who reach the statutory retirement age, which is currently 65 but will be 67 in 2031.

Controversially, however, some occupations have been excluded from the scheme. These include civil servants, tradespeople, the self-employed and those employed in agriculture and forestry.

Together with this pension reform, the German government is  reportedly seeking to tighten access to Bürgergeld, Germany’s basic income support for work-capable adults struggling with living costs. Ministers hope this will motivate more people to return to work.

Opposition politicians have warned that this could deepen hardship for vulnerable households - echoing the UK’s recent debate over benefits cuts - and mark a return to Germany’s former system, with benefit reductions potentially undermining a stable return to employment.

Other EU countries offer incentives for older people to continue working. These typically come via lower tax rates, such as Sweden’s enhanced earned-income allowance for those over 66, or bonus credits for deferred pensions like Denmark’s seniorpræmie.

In the majority of European countries, state pension deferral bonuses are reportedly the norm, and pensioners continue to work under their previous salaries and normal taxation rates.

Source: Personnel Today

(Quote via original reporting)

The German government is set to introduce an ‘active pension’ from January 1, 2026 which allows individuals who choose to work past the statutory retirement age to earn up to €2,000 per month tax-free, Personnel Today reports.

Labour minister Bärbel Bas called the Aktivrente (active pension) an incentive intended to keep experienced workers in the labour market. 

The scheme was reportedly part of Christian Democratic Union chancellor Friedrich Merz’s campaign when he was elected in February 2025.

Ms Bas said, “Anyone who voluntarily wants to work longer needs attractive conditions”, and stated that the government would lift the ban on prior employment, which had prevented retirees from simply returning to their former places of work.

Over the next decade, around 9 per cent of Germany’s population is due to retire. A prospect which has made urgent action essential.

“It is counterproductive that employees who wanted to continue working after reaching retirement age were not allowed to return easily to their old employer,” Ms Bas said.

The active pension will be available to most working people who reach the statutory retirement age, which is currently 65 but will be 67 in 2031.

Controversially, however, some occupations have been excluded from the scheme. These include civil servants, tradespeople, the self-employed and those employed in agriculture and forestry.

Together with this pension reform, the German government is  reportedly seeking to tighten access to Bürgergeld, Germany’s basic income support for work-capable adults struggling with living costs. Ministers hope this will motivate more people to return to work.

Opposition politicians have warned that this could deepen hardship for vulnerable households - echoing the UK’s recent debate over benefits cuts - and mark a return to Germany’s former system, with benefit reductions potentially undermining a stable return to employment.

Other EU countries offer incentives for older people to continue working. These typically come via lower tax rates, such as Sweden’s enhanced earned-income allowance for those over 66, or bonus credits for deferred pensions like Denmark’s seniorpræmie.

In the majority of European countries, state pension deferral bonuses are reportedly the norm, and pensioners continue to work under their previous salaries and normal taxation rates.

Source: Personnel Today

(Quote via original reporting)