Tax exemption of EUR 2000 for pensioners becomes effective with the implementation of the Merz plan, applicable from a certain age.
The German government, under the leadership of the CDU, has introduced a new policy proposal aimed at encouraging people to continue working beyond the traditional retirement age. Known as the Active Pension, this initiative is designed to provide financial incentives and create more flexibility for the transition between work and retirement.
The Active Pension is intended for individuals who have reached the regular retirement age and wish to continue working voluntarily. It allows pensioners to earn up to 2,000 euros tax-free per month on top of their pension, providing a financial boost for those choosing to remain in the workforce.
However, there has been some confusion about the exact implementation of the planned Active Pension. Several details still need to be clarified before a draft bill can be drawn up, including its applicability to people who retire early and those born after 1967.
The retirement age is a significant factor in relieving the pension system, according to the Bundesbank. Yet, the coalition agreement states that the retirement age will not be raised further. The Bundesbank argues that financial incentives are not the main reason why people work longer, and the Active Pension would mainly benefit those who would continue working beyond retirement age anyway.
The Active Pension is part of the coalition agreement following the change of government at the beginning of the year. It is also worth noting that the retirement savings landscape in other countries is evolving. For instance, in Ireland, an automatic retirement savings system called the My Future Fund is set to begin on January 1, 2026, for employees between the ages of 23 and 60 who earn at least €20,000 and are not in exempt employment.
As the Active Pension policy continues to develop, it will be interesting to see how it impacts the working lives of Germans and the overall pension system. For those planning their retirement, understanding the evolving landscape of retirement savings and policies is crucial. A tax tips guide for tax savings in old age is available as a free PDF download to help navigate these changes. However, please note that the link to the guide may not work due to privacy settings or ad blocker settings.
[1] Source: www.gov.ie/en/publication/3f394-pensions-automatic-enrolment-pensions/ [2] Source: www.ssa.gov/planners/retire/agereduction.html [3] Source: www.irishtimes.com/business/personal-finance/pensions/my-future-fund-will-be-introduced-in-2026-for-workers-aged-23-to-60-1.4587434 [4] Source: www.ssa.gov/planners/retire/10_monthly_benefit.html [5] Source: www.irishtimes.com/business/personal-finance/pensions/my-future-fund-will-be-introduced-in-2026-for-workers-aged-23-to-60-1.4587434
- The Active Pension, a part of the coalition agreement in Germany, is set to creating a new dynamic in the business sector by encouraging pensioners to work beyond the traditional retirement age, potentially impacting the general-news landscape as well.
- As the retirement savings landscape across borders changes, with Ireland introducing the automatic retirement savings system called the My Future Fund in 2026, understanding the role of politics and business in shaping such policies is crucial for individuals planning their retirement, especially considering the evolving financial incentives offered in various countries.
