German retirees who continue working set to earn 1,750 a month tax-free

"Germans who continue in the labour market beyond retirement age will be able to earn up to 1,750 (2,000) a month tax-free on top of their pension under a scheme aimed at boosting economic growth and labour force participation rates. The Aktivrente, or active pension scheme, due to come into force in January, was promised on the campaign trail by the chancellor, Friedrich Merz, before he came into office five months ago."

"Merz has described the measure as an attempt to take the bull by the horns after three years of economic stagnation exacerbated by a lack of skilled labour, itself a consequence of a chronic demographic crisis. Fewer Germans are being born and increasing numbers are entering retirement. About 9% of the workforce 4.8 million people are due to retire in the next decade."

"The effects are felt on a daily basis across multiple sectors of the economy, including construction, education and health. The Aktivrente forms part of what Merz has called an autumn of reforms to bring radical structural reform to Europe's largest economy. According to the wording of the draft bill, the tax incentive is expected to help keep experience and knowledge in companies for longer and bring about an overall increase in the employment rate as well as contributing to economic growth and higher government revenues."

Germany will implement the Aktivrente in January, allowing retirees who remain in the labour market beyond statutory retirement age to earn up to €1,750 (€2,000) per month tax-free on top of their pension. The CDU–SPD coalition aims to raise labour force participation, keep experience and knowledge in firms, and stimulate economic growth amid a demographic crisis and labour shortages. A draft law is expected to pass cabinet before Bundestag debate. Both employees and employers will pay social security contributions on extra earnings, which should support health and pension systems and increase government revenues as older workers delay full retirement.

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