Germans who choose to work beyond the retirement age will be able to earn up to €2,000 a month tax-free, as part of chancellor Friedrich Merz’s push to tackle labour shortages and revive Europe’s largest economy.
The government estimates that the measure will cost €890mn a year from the moment it takes effect, on January 1, according to draft legislation seen by the Financial Times. The so-called active pension plan, a Merz campaign pledge, is expected to be approved by his coalition with the Social Democrats on Wednesday.
Merz’s coalition is seeking to mitigate the impact of Germany’s ageing workforce as the economy grapples with a shortage of skilled labour after three years of stagnation. The initiative is one structural change delivered by the coalition, as part of a broader “autumn of reforms” promised by the chancellor.