Germany's 'Active Pension' to Offer Tax-Free Income for Older Workers
The German government is set to introduce the 'active pension' in 2026, offering a tax-free income of up to €2,000 per month, in addition to the basic tax-free allowance. This new scheme aims to encourage older employees to continue working beyond retirement age. However, the initiative has sparked debate due to its potential benefits and drawbacks.
Critics argue that the 'active pension' primarily advantages healthy individuals in less demanding professions. Those with age-related restrictions may not be able to take full advantage of the scheme, leading to concerns about fairness. Additionally, social associations warn of significant tax losses and the exclusion of mini-jobbers and the self-employed.
Initially proposed in the coalition agreement with a tax-free income cap of €24,000, the plan has been revised to offer up to €36,000. This increase aims to provide greater financial relief for older employees who choose to continue working.
The 'active pension' is scheduled to begin in 2026, initially for employees and civil servants, with tax incentives for continued employment. While the plan offers substantial financial benefits, it also faces criticism and exclusions. The government continues to refine the scheme, with no nationwide introduction date set for all groups, including the self-employed.
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