As the last day of active employment approaches, retirement becomes a reality for many individuals in Germany. While some eagerly anticipate this milestone, others prefer to continue working during their retirement years. In response to this growing trend, the “Flexirente” program has been established to facilitate a self-determined transition from the workforce to retirement.
Since 2012, the statutory retirement age has been incrementally raised and is set to reach 67 years by the year 2031. Simultaneously, a rising number of Germans are opting to work longer, either by delaying their retirement or continuing to work alongside their pension. The motivations behind this trend are diverse, with older individuals seeking to maintain their physical fitness, nurture social connections, pass on their experiences, improve their financial situation, and experience a sense of appreciation.
According to data from the Federal Employment Agency as of June 30, 2022, approximately 317,000 people had deferred their retirement to continue working, and around 990,000 retirees were engaged in part-time jobs.
Introduced on January 1, 2017, the “Flexirente” program aims to incentivize older workers to work beyond the regular retirement age, offering them greater flexibility in designing their transition from the workforce to retirement.
Key features of the “Flexirente” program include:
- Postponing Retirement: Individuals who reach the regular retirement age are not automatically required to retire. Retirement benefits are granted only upon application.
- Higher Pension for Delayed Retirement: By postponing the retirement date and continuing to work, individuals receive a 0.5 percent increase in their pension for each month of postponement. Additionally, their pension is augmented by the continued payment of retirement insurance contributions.
- Combining Pension and Employment: The “Flexirente” program facilitates a flexible transition from the workforce to retirement. Retirees who choose to work alongside their pension can earn additional income without any limitations and can further increase their pension by contributing to the retirement insurance system.
To avail of this option, retirees must inform their employers that they wish to have retirement insurance contributions deducted from their salaries. The enhanced pension, resulting from the additional contributions, is then paid starting from the following July. Furthermore, a 0.5 percent monthly supplement is applied to the pension during the period between reaching the regular retirement age and the commencement of the higher pension.
Hinzuverdienstgrenzen (Additional Earnings Thresholds) Raised: As of January 1, 2023, the “Flexirente” law removed the previously set threshold for additional earnings for early-age retirement pensions. Consequently, early retirees with part-time jobs can now earn unlimited additional income without any reduction in their pensions.
Furthermore, the “Hinzuverdienstgrenzen” for pensions due to partial and full disability were significantly increased on the same date. The additional earnings threshold for partial disability pensions stands at approximately 35,650 euros, while for full disability pensions, it is approximately 17,820 euros.
It is crucial to note that individuals receiving disability pensions are still bound by the assessed capacity for work, which forms the basis for their pension. Failure to adhere to this limit may result in losing the right to the pension, despite complying with the “Hinzuverdienstgrenzen.”
Seek Individual Consultation: Determining whether to postpone retirement or combine pension with employment is a complex decision and varies for each individual. Therefore, the German Pension Insurance provides comprehensive and personalized advice to help individuals navigate their retirement choices.
Given the intricacies of the pension system and the unique circumstances of each person, whether seeking early retirement or considering additional earnings alongside their standard pension, it is advisable to consult with the German Pension Insurance for tailored guidance.
https://www.bundesregierung.de/breg-de/aktuelles/flexirente-2195570