Since 1 January 2026, there has been a new tax exemption for pensioners who remain in employment subject to social security contributions beyond the standard retirement age. The so-called ‘active pension’ allows them to receive up to 2,000 euros in wages each month tax-free. The Federal Ministry of Finance has published a list of frequently asked questions (FAQs) on this subject, which was last updated in June 2026.
What is the active pension?
The provision in Section 3(21) of the Income Tax Act (EStG) exempts income from employment of up to 2,000 euros per month from tax if the employee has already passed the statutory standard retirement age and the employer pays pension insurance contributions on their behalf. This amounts to a maximum of 24,000 euros tax-free per year, and the allowance applies in addition to the basic tax-free allowance. Unlike, for example, with short-time working allowance, there is no progression clause that would increase the tax rate on the remaining income.
Who stands to benefit, and who doesn’t?
This scheme is available to all employees subject to social security contributions who have reached the statutory standard retirement age. For those born in 1964 or later, this is 67 years of age. Anyone who has retired earlier – for example, under the ‘retirement at 63’ scheme – can still claim the active pension, but only from the month after they reach the standard retirement age. So-called ‘midi-jobs’ in the transitional category are also included.
However, the self-employed, civil servants and those in marginal employment are not eligible, as no pension insurance contributions are paid by the employer on behalf of these groups. Whether managing partners of a GmbH can make use of the active pension depends on whether they are subject to compulsory pension insurance in the specific individual case.
How does the tax exemption work in practice?
The employer takes the tax-free allowance into account when making the monthly payroll tax deduction. The tax-free allowance applies strictly on a monthly basis. Any unused portion of the allowance cannot be carried over to other months. Christmas bonuses or other special payments are only tax-free provided that, together with the regular salary, they do not exceed the €2,000 limit in the respective month.
An example from the BMF’s FAQs: Someone receives 1,500 euros a month from May onwards and is paid an additional 800 euros in Christmas bonus in December. In December, therefore, only €500 of the Christmas bonus is tax-free, as the €2,000 tax-free allowance has already been used up by the regular salary of €1,500. The remaining €300 of the Christmas bonus is subject to standard taxation.
If you hold several jobs at the same time, the active pension can only be taken into account for one of these jobs under the payroll tax deduction scheme. Any unused balance from the second job can be claimed retrospectively via your income tax return.
Details shown on the payslip
Tax-free income from the active pension must be shown in the payslip and on the income tax statement. In the electronic statement for 2026, the designation for this is Tax allowance for occupational pension provided for in a line that can be used as required. An annual income tax adjustment by the employer is not permitted in the case of an active pension.
What does this mean for clients?
Anyone who continues to work after reaching retirement age, or who returns to work after a break, can benefit from significant tax advantages through the ‘active pension’ scheme. Employers are obliged to apply the tax exemption correctly and, where necessary, to make retroactive adjustments if this has not been done since the start of the year. In cases of complex employment arrangements, such as holding multiple jobs or acting as a shareholder-managing director, it is advisable to seek personalised tax advice.
Source: Haufe: Human Resources
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