The new active pension scheme from an employment law perspective
The so-called active pension scheme came into force on 1.1.2026. Employees who have already reached the statutory retirement age are now able to voluntarily continue working and, in doing so, to earn up to €2,000 gross monthly free of tax from employment that is subject to mandatory social security deductions. In this report we discuss what the arrangements under a contract of employment might look like.
Scope of application and social security law
The active pension scheme is not a new type of retirement benefit, but rather a monthly tax-free allowance that is not subject to the exemption-with-progression rule. The self-employed, farmers, foresters, those with mini-jobs and civil servants are excluded from the active pension scheme. For those insured under the statutory pension insurance scheme born in or after 1964, the statutory retirement age is 67. For insured persons born before 1.1.1964, the statutory retirement age is determined according to the gradual statutory phasing-in - at the earliest this would however be upon reaching the age of 65. In the case of early retirement, prior to reaching the relevant statutory retirement age, an active pension would likewise not be possible.
The obligation to pay contributions to insurance schemes for health, long-term care, pension, and unemployment generally remains unaffected, whereas once an employee starts to receive a full pension, they will be exempt from their own obligation to pay contributions to pension insurance and unemployment insurance; however, the employer’s share of the contributions to pension insurance and unemployment insurance will still be incurred. Nevertheless, as a result, there will cease to be an entitlement to sickness benefits when receiving a full pension.
Possible arrangements under the contract of employment once the statutory retirement age has been reached
Without an (effective) age limit clause, an existing employment relationship will automatically continue even after the retirement age has been reached. With an effective age limit clause, it is possible to extend the existing employment relationship via:
A postponement agreement - The existing employment contract with an effective age limit clause can be seamlessly extended beyond the statutory retirement age via a written agreement. This agreement has to be concluded while the employment relationship is still ongoing, therefore, as long as the worker is still employed. It is possible to postpone the termination in writing multiple times and this does not require objective justification. After leaving the company, the only option would be to conclude a new employment contract.
A fixed-term on objective grounds - A fixed-term on objective grounds in accordance with Section 14(1) of the Part-Time Work and Fixed-Term Contracts Act (Teilzeit- und Befristungsgesetz, TzBfG) would likewise be an option.
Hiring a person who is at least 52 years old - Furthermore, it is permitted to hire a person who is at least 52 years old (Section 14(3) TzBfG) for a maximum period of five years if, prior to the start of the fixed-term employment agreement, this person had been seeking a job for at least four months.
Fixed-term employment that is not justified by an objective reason following the relaxation of the so-called prohibition of repeated fixed-term employment contracts (Anschlussverbot) - The so-called Anschlussverbot was relaxed with effect from 1.1.2026. Ever since then, employees who have reached the statutory retirement age and had previously already been employed by the same employer may be hired on a fixed-term basis that is not justified by an objective reason. Here, the following mandatory requirements under Section 41(2) of Volume VI of the German Social Security Code (as amended) have to be cumulatively satisfied:
- Under Section 14(2) sentence 1 TzBfG, the individual fixed-term employment contract not justified by an objective reason with an employee who has reached the statutory retirement age may not exceed a total period of two years with a maximum of three extensions.
- All the fixed-term employment contracts not justified by an objective reason, taken together, may not exceed a maximum overall period of eight years, and
- the maximum number of fixed-term employment contracts not justified by an objective reason concluded with the same employer may not exceed twelve.
- In fixed-term contracts, we would recommend employers to provide the possibility of an ordinary termination with notice.
Co-determination and payroll accounting
The works council’s rights to co-determination and participation need to be taken into consideration. Moreover, an active pension must be correctly recorded and documented in the payroll accounting.
