Working beyond retirement age
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The objective of the planned measures is to increase both the effective retirement age and the employment rate of older workers through tax and social security incentives. The core element of the proposed reform is the introduction of a so-called activity allowance (Aktivitätsfreibetrag).
Tax allowance of up to € 1,250 per month
Individuals who have reached the statutory retirement age and who either defer their retirement or continue to work while receiving an old-age pension shall, subject to certain conditions, be entitled to claim a tax allowance of up to € 1,250 per month or a maximum of € 15,000 per year.
If income does not exceed € 1,250, the wage tax assessment base is reduced to zero and no wage tax is levied. If income exceeds € 1,250, only the excess amount is subject to wage tax.
The allowance is intended to apply to income from active employment and thus reduce the tax burden on earned income. Passive income is not eligible, such as income from business leasing arrangements, occupational pensions, or participations as a purely capital-based partner.
480 insurance months for men
The preferential treatment is to be subject to specific eligibility requirements. In addition to having reached the statutory retirement age and being entitled to an old-age pension, individuals must demonstrate a minimum number of insurance months. For men, 480 insurance months are currently предусмотр (intended/foreseen). For women, initially lower thresholds apply, which are to be gradually aligned with the increasing retirement age.
Individuals receiving a partial pension, however, shall be able to claim the allowance even without meeting these minimum insurance periods.
Changes in social security law
In addition to tax relief, the proposed package of measures also предусматривает (provides for) adjustments in the area of social security. In the future, employees who continue to work after reaching the statutory retirement age or defer retirement will no longer be required to pay the employee’s contribution to pension insurance. The employer’s contribution, however, will remain unchanged.
This model is also intended to apply to self-employed individuals insured under the GSVG, BSVG, or FSVG. The following reduced contribution rates in pension insurance are envisaged:
- For insured persons under the GSVG (trade and new self-employed): from 18.5% to 10.18%
- For insured persons under the BSVG (agriculture and forestry): from 17% to 9.36%
- For insured persons under the FSVG (freelancers): from 20% to 11.01%