Germany’s proposed ‘Aktivrente’, or active pension, is a step towards encouraging older workers to remain in employment, but will bring only limited relief to the country’s labour shortages, according to leading economists.
The measure is intended to fit within Germany’s three-pillar pension system and would allow retirees to earn up to €2,000 a month tax-free, even if already drawing a state pension. The reform is one of several proposals from the ruling coalition of Social Democrats and centre-right CDU/CSU alliance to boost investment and tackle economic stagnation.
However, experts have warned that broader changes will be required to make a lasting impact.
“It is also important to invest in health, continuing education, and jobs, so that older people can actually work longer. For many, this is currently impossible due to poor health or excessive workload,” Peter Haan, professor of empirical economic research at the Frei Universität and head of the public sector department at DIW Berlin, told IPE.
While the active pension provides financial incentives for post-retirement employment, Haan has argued that legal reforms are also needed to ease the hiring of retirees on temporary contracts.
“I don’t see any problems. Benefits from all pillars remain intact despite continuing to work,” he said. “In the long term, it could lead to fewer investments in private pensions if younger people plan to work longer. How large this effect would be is difficult to estimate. In my opinion, it’s rather small.”
According to a DIW study, around 230,000 working pensioners – mostly higher earners – would benefit directly from the tax exemption. But the think tank warned that the policy’s overall labour market impact would be marginal.
“The demographic change is now fully under way, we are losing hundreds of thousands and cumulatively millions of workers every year, which cannot be replaced through migration. Therefore, the government wants to keep older people that are still fit, in the labour market,” said Stefan Bach, research associate at DIW’s public finance department.
Bach added that while the measure targets approximately one million older employees, only around 300,000 of those currently paying into the social insurance system would qualify.
DIW’s study concluded that to make a real difference, more comprehensive financial incentives would be needed – such as direct employer contributions to pension and unemployment insurance.
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