New partial retirement and changes to partial retirement for older workers

The amendment to the law, which will introduce a “partial pension” and changes to partial retirement for older workers with effect from January 1, 2026 (see previous reports in the June 2025 and July 2025 newsletters), was published in the Federal Law Gazette on July 24, 2025 (BGBl. I No. 47/2025). Below is a summary of the most important legal changes contained therein:

The new partial pension 

In order to enable a gradual transition out of working life, insured persons who meet the requirements for an (early) old-age pension will, from January 1, 2026, have the option of claiming a corridor pension, heavy labor pension, long-term insurance pension, or regular retirement pension as a “partial pension” (i.e., a certain percentage of the full pension). Part of the pension is paid monthly while the person continues to work part-time. This allows them to continue to accrue insurance periods and contribution bases, which has a positive effect on the final pension amount. The prerequisite for claiming a partial pension is that a corresponding agreement is concluded between the employee and the employer (no legal entitlement) and that the previous working hours are demonstrably reduced by at least 25% and at most 75%:

Please note: The planned new “partial pension” should not be confused with the former AMS benefit of the same name for “extended partial retirement” (after reaching the corridor retirement age). In contrast to the previous “partial pension,” the “partial pension” that will be available from 2026 is a genuine pension, i.e., one granted by the pension insurance institution.

The introduction of partial retirement expands the range of possible options for pension candidates for a flexible combination of work and retirement by adding another option. The following options are conceivable (depending on age, years of insurance, desired or agreed working hours with the employer, etc.):

Practical tip: Companies should exercise restraint when giving specific advice to employees on which option would be most financially advantageous in individual cases. Pension regulations are extremely complex, and employers do not usually have all the information required to make a comprehensive assessment of pension law. When asked for pension advice, the HR/payroll department should therefore refer employees to external advisory services, such as the social law department of the Chamber of Labor or the Pension Insurance Institution (PVA), or to the information material published by these bodies.

Link tip: The PVA offers a brochure on its website with detailed information about partial retirement:

 https://www.pv.at/web/pension/pensionsarten/teilpension

Changes to partial retirement

The amendment to the law provides for the following measures for partial retirement from January 1, 2026 (§ 27, § 28, § 79 (189), § 82 (8) AlVG):

1. Gradual reduction of the maximum period for receiving partial retirement benefits for continuous partial retirement from five to three years (before fulfilling the eligibility requirements for the corridor pension or before reaching the standard retirement age), as follows:

• Start of partial retirement benefits in 2026: 4.5 years,
• Start of partial retirement benefits in 2027: 4 years,
• Start of partial retirement benefits in 2028: 3.5 years,
• Start of partial retirement benefits from 2029: 3 years.

2. Gradual increase in the required unemployment insurance periods prior to partial retirement from 15 years (780 weeks) to 17 years (884 weeks) by January 1, 2029.

3. Redefinition of the upper limit (for continuous partial retirement beginning on or after January 1, 2026): The upper limit (12-month average) used to calculate wage compensation will now only be calculated on the basis of remuneration for normal working hours (i.e., excluding overtime and overtime allowances in particular).

4. Reduction of the AMS replacement rate for continuous partial retirement starting on January 1, 2026, to 80% in the years 2026 to 2028 (from 2029 onwards, 90% will apply again). 

5. Loss of partial retirement benefits when taking up employment alongside partial retirement: The partial retirement allowance (including wage compensation) and the application of the full social security contribution basis shall cease to apply in accordance with Section 28 of the Austrian Partial Retirement Act (AlVG) for those months in which the employee works for another employer in addition to partial retirement, unless the other employment was already carried out regularly in the year prior to the start of partial retirement. The employee is required to report this to the AMS. This prohibition on secondary employment is immediately applicable to partial retirement arrangements that begin on or after January 1, 2026. For partial retirement arrangements that began before 2026, however, the regulation will only apply from July 1, 2026, i.e., there will be a six-month transition period for the termination of employment that is detrimental to partial retirement benefits.

Important note: Sections 27 and 28 of the Austrian Unemployment Insurance Act (AlVG) regulate the conditions for partial retirement benefits vis-à-vis the AMS and generally do not affect labor law. It is therefore not possible to provide a legally certain answer as to whether the loss of partial retirement benefits due to impermissible secondary employment automatically eliminates the wage compensation claim in the relationship between the employee and the company. To be on the safe side, it is therefore strongly recommended that a corresponding provision be included in the partial retirement agreement. The VP editorial team is currently analyzing the new regulations on partial retirement and partial retirement. New templates (sample formulations, overviews, etc.) will be available for this purpose.

Link to the Federal Law Gazette (BGBl. I No. 47/2025): https://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2025_I_47/BGBLA_2025_I_47.html