- Old age labor should be compensated with enhanced pension contributions.
Government Proposes Bonus for Extended Work Past Retirement
The federal government is planning to offer a bonus for individuals willing to work beyond their retirement age. Presently, employees can boost their future pension payments by continuing to work past the standard retirement age. In the future, this will also include the option to receive these benefits as a lump sum, known as a deferred pension bonus. This initiative is part of the "Growth Initiative" approved by the traffic light coalition in July and now requires discussion and approval in the Bundestag.
Work an Extra Year, Earn 22,000 Euros Bonus
This bonus will be tax-free and calculated based on the pension that would have been paid and the social security savings made during the additional employment period. According to estimates by the social association VdK, an individual with a gross pension of around 1,600 euros at retirement age, who works an additional year at the average wage, could receive a tax-free payment of approximately 22,000 euros.
Choose Between Lump Sum or Higher Regular Pension
Instead of a one-time payment, employees can also opt to increase their monthly pension by working longer. Working an extra year increases the old-age pension by six percent. Additionally, further increases are due to continued pension fund contributions. Over half of the people aged 50 and over can imagine working beyond retirement age, according to a recent survey by the career network Xing.
Employer Contributions Directly to Employee's Account
Another proposal from the cabinet allows employers to pay their retirement-age employee contributions directly into the employees' unemployment and pension insurance accounts. The rationale behind this is to enhance their income and encourage prolonged employment. If employers fail to make these contributions to their employees, they will still be responsible for paying the employer contributions to the unemployment and pension insurance fund.
Heil and Habeck Highlight Importance of Skilled Workforce Preservation
Federal Minister of Labour Hubertus Heil (SPD) stated in Berlin: "Those who wish to voluntarily contribute their knowledge and skills will benefit from the new regulations. This is a significant step towards securing experienced skilled workers for our economy." His cabinet colleague, Federal Minister of Economics Robert Habeck (Greens), added: "The measures adopted are crucial for Germany's economic development due to demographic change, as we cannot afford to lose the knowledge, skills, and experience of older individuals willing to continue working."
New Regulations for Fixed-term Contracts and Widows' Pension
The legislative proposal also includes flexibility in fixed-term employment contracts for individuals planning to work beyond retirement age. Additionally, individuals receiving a survivor's pension ("widow's" or "widower's" pension) will be able to earn more without this impacting their pension. As a result, full-time employment at the minimum wage while receiving a survivor's pension will be exempt from offsets, according to the Federal Ministry of Labour. Based on estimates from the German Trade Union Confederation, the gross monthly earnings for a 40-hour week at the minimum wage are around 2,150 euros.
The Bonus is Proposed to be Disbursed through the Cabinet
The prospective bonus for extended work past retirement age will be handled by the federal government's Cabinet, ensuring a smooth implementation of the policy.
The Cabinet's Initiative Encourages Extended Employment
The Cabinet's proposal to offer a bonus for work beyond retirement age is a strategic move to motivate individuals to extend their employment, benefiting both individuals and the economy.
