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Working in Old Age
The federal government has drafted a package of measures that will come into force on 1 January 2027 and is intended to make continued employment after reaching the statutory retirement age more attractive.
The aim of the planned measures is to increase both the actual retirement age and the employment rate of older workers through tax and social‑security incentives. The core of the proposed reform is the introduction of a so‑called activity allowance.
Tax allowance of up to EUR 1,250 per month
Persons who have reached the statutory retirement age and either postpone their retirement or remain employed alongside receiving an old‑age pension should, subject to certain conditions, be able to claim a tax allowance of up to EUR 1,250 per month or a maximum of EUR 15,000 per year. If the income is at most EUR 1,250, the wage‑tax assessment base is reduced to zero and no wage tax is payable. Where the income exceeds EUR 1,250, only the excess forms the assessment base for wage tax.
The allowance is to be applied to income from active employment and therefore reduces the tax burden on earned income. Not eligible are passive incomes, such as income from leasing of a business, from occupational pensions or from holdings as a capitalist co‑entrepreneur.
480 insurance months for men
The benefit is to be linked to certain prerequisites. In addition to reaching the statutory retirement age and having a claim to an old‑age pension, persons must demonstrate a specified number of insurance months. Currently, 480 insurance months are required for men. Women are subject to lower requirements initially, which will be gradually adjusted to the rising retirement age. Those receiving a partial pension should be able to use the allowance even without meeting these minimum insurance periods.
Changes to social‑security law
In addition to tax relief, the proposed package also includes adjustments in the area of social security. In the future, employees who continue to work after reaching the retirement age or who postpone retirement will no longer have to pay the employee contribution to pension insurance. The employer contribution will remain unchanged.
This model is also to apply to self‑employed persons insured under the GSVG, BSVG or FSVG. The following reduced contribution rates in pension insurance will then apply:
Tax allowance of up to EUR 1,250 per month
Persons who have reached the statutory retirement age and either postpone their retirement or remain employed alongside receiving an old‑age pension should, subject to certain conditions, be able to claim a tax allowance of up to EUR 1,250 per month or a maximum of EUR 15,000 per year. If the income is at most EUR 1,250, the wage‑tax assessment base is reduced to zero and no wage tax is payable. Where the income exceeds EUR 1,250, only the excess forms the assessment base for wage tax.
The allowance is to be applied to income from active employment and therefore reduces the tax burden on earned income. Not eligible are passive incomes, such as income from leasing of a business, from occupational pensions or from holdings as a capitalist co‑entrepreneur.
480 insurance months for men
The benefit is to be linked to certain prerequisites. In addition to reaching the statutory retirement age and having a claim to an old‑age pension, persons must demonstrate a specified number of insurance months. Currently, 480 insurance months are required for men. Women are subject to lower requirements initially, which will be gradually adjusted to the rising retirement age. Those receiving a partial pension should be able to use the allowance even without meeting these minimum insurance periods.
Changes to social‑security law
In addition to tax relief, the proposed package also includes adjustments in the area of social security. In the future, employees who continue to work after reaching the retirement age or who postpone retirement will no longer have to pay the employee contribution to pension insurance. The employer contribution will remain unchanged.
This model is also to apply to self‑employed persons insured under the GSVG, BSVG or FSVG. The following reduced contribution rates in pension insurance will then apply:
- For insured persons under the GSVG (commercial and new self‑employed) from 18.5% to 10.18%
- For insured persons under the BSVG (farmers and foresters) from 17% to 9.36%
- For insured persons under the FSVG (freelancers) from 20% to 11.01%