Tax Exemption of EUR 2,000 for Pensioners Set - Determining Validity of Merz Plan and Age Eligibility
In a significant move aimed at encouraging employment among pensioners, the German government has announced plans to introduce the Active Pension from 2025 onwards [2]. This new policy will allow eligible pensioners to earn up to 2,000 euros per month tax-free, providing a unique opportunity for those who wish to continue working past the traditional retirement age.
This announcement is part of a broader set of labor reforms initiated by the federal government in mid-2025, which also includes easier fixed-term employment of retirees by former employers and other market adjustments [2]. While the exact start date for the tax exemption on pensioners' employment income up to 2,000 euros monthly is not yet confirmed, partial implementation appears to have begun as early as July 2025.
The Active Pension is designed for individuals who have reached the legal retirement age and choose to work voluntarily. This policy is expected to offer more flexibility for the transition between work and retirement, providing an incentive for pensioners to remain active in the workforce.
However, there has been some confusion regarding the implementation of the Active Pension. Despite the coalition agreement including the Active Pension in its plans at the beginning of the year, the timing for its application for employees born after 1967, who retire regularly after the age of 67, remains unclear.
The Bundesbank has expressed skepticism about the plans for the Active Pension, arguing that adjusting the retirement age would be a more significant factor in relieving the pension system. Nevertheless, the government is moving forward with the implementation of this policy, recognising its potential benefits for pensioners and the labour market.
It is important to note that the Active Pension will not apply to those who take early retirement. Moreover, the details of the Active Pension still need to be clarified before a draft law can be drawn up.
For those seeking guidance on tax savings, a compact guide is available for download, providing tips on tax allowance and taxation abroad. [Link provided]
Stay tuned for further developments on this exciting new policy that promises to reshape the retirement landscape in Germany.
[2] Source: German Federal Government's official website
- This labor reform initiative by the German government, including the Active Pension policy, is not confined to employment matters, as it also involves aspects of finance, with pensioners now able to earn up to 2,000 euros per month tax-free.
- The broader set of labor reforms, which includes the Active Pension and other market adjustments, could potentially impact the business sector, as it provides incentives for pensioners to continue working, thereby influencing the workforce dynamics and general-news landscape.
