Tax-exempt active pension to be launched in January 2026, though not for all individuals
The German government is set to introduce a new pension scheme called the Active Pension, with a planned implementation date of January 1, 2026. The scheme will apply to individuals who have reached the statutory retirement age, which varies depending on the year of birth.
The Federal Chancellor, Friedrich Merz (CDU), has announced that the Active Pension is expected to provide pensioners with up to 24,000 euros tax-free per year. This is a significant increase, as currently, employed pensioners can earn up to 2,000 euros tax-free per month.
The Active Pension is designed to motivate pensioners to participate in the workforce for longer. However, it is important to note that the scheme only applies to those who wish to work voluntarily. Early retirees, especially those retiring due to health reasons, may not qualify.
The Active Pension is not without controversy. The Institute of the German Economy (IW) has expressed criticism towards the scheme, citing potential economic implications. Despite this, other countries such as the Netherlands and Poland are also considering adjustments to their pension systems.
In addition, a new book by the consumer center titled 'Getting money back from Father State' is relevant for tax returns of pensioners and retirees in 2024/2025. This book could provide valuable insights for those navigating the complexities of tax returns in the coming years.
It's also worth noting that income tax currently applies to employed pensioners, unless they have a mini-job of up to 556 euros per month. The final bill regarding exceptions for early retirees is yet to be determined.
In conclusion, the Active Pension is a significant change in the German pension system, offering potential tax advantages for voluntary workers over the age of 67. However, it's important to understand the details and considerations surrounding the scheme, particularly for early retirees and those facing health issues.
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