The planned “Active Pension” of the federal government aims to allow retirees to retain up to 2,000 euros in monthly earnings tax-free. The goal is to motivate older people to stay longer in the workforce or continue working after retirement. This law is considered a prestige project of the current coalition and aims to create new financial leeway for those working in retirement.
Economic Evaluation by the DIW
The German Institute for Economic Research (DIW) has analyzed the effects of the Active Pension and arrives at a critical result: the measure could cost the state more than it brings in – especially if not enough additional retirees take up employment.
- Tax Revenue Losses: The DIW estimates the annual tax revenue losses due to the tax bonus at around 0.8 billion euros.
- Windfall Effects: The tax bonus would primarily benefit already working retirees (about 230,000 individuals), without necessarily creating new jobs.
- Necessary Additional Employment: To offset the tax revenue losses, the DIW states that approximately 75,000 additional jobs would need to be created.
- Skeptical Assessment of Motivation: The Federal Bank expressed doubts about whether the Active Pension can indeed encourage many more retirees to work longer or return to work.
Impact on Savers and Retirement Provision
Differing consequences arise for savers and the self-employed:
- Tax-free Additional Income: Up to 2,000 euros per month remain tax-free – regardless of whether one voluntarily contributes to the statutory pension or not.
- Voluntary Contributions to the Statutory Pension: For the self-employed, making a voluntary contribution is particularly financially advantageous only if they are already subject to compulsory insurance; otherwise, private provisions (e.g., via ETFs) are usually more profitable – albeit with less predictability and security.
- Pension Policy Overall: The Active Pension could contribute to stabilizing the labor supply among older workers in the long term. However, there is the risk of windfall effects: those who are already working benefit from the bonus without additional macroeconomic benefit.
Conclusion
While the Active Pension offers attractive incentives for working retirees as well as potentially for the self-employed in retirement; its economic benefit strongly depends on how many people actually return to the workforce (or increase their hours) because of the new law. If this effect does not occur or is less than hoped – which experts like the DIW fear – high costs for the state could arise alongside a low macroeconomic added value.
For savers, this means: While some may benefit from tax-free additional earnings (particularly higher earners), it remains uncertain whether this measure will contribute to stabilizing the German welfare state in the long term or end up as an expensive experiment.