General

What is the Active Pensions Act?

With the Active Pensions Act, the Federal Government wants to create a tax incentive for older employees to continue working after reaching the statutory retirement age from 1 January 2026. 

The goal is to make employment at retirement age more attractive, to counteract the shortage of skilled workers and to strengthen the social security funds. The active pension introduces a tax-free allowance that is intended to financially promote the continuation of professional activity after reaching the standard retirement age.

Legislative procedure 

Who benefits from the active pension?

The allowance is mainly aimed at Employees subject to social security contributions, which exceeds the statutory retirement age (i.e. R. the completion of the 67th century. year of life with transitional arrangements for older age groups). The preferential treatment is to take place regardless of whether a pension has already been drawn or whether the employee is postponing retirement including pension. 

The following are not beneficiaries: 

• Self-employed, freelancers, tradespeople and farmers and foresters
• Civil servants and marginally employed persons (mini-jobbers)
• Persons who have not yet reached the standard retirement age

On 15 October 2025, the Federal Cabinet adopted the government draft for the Active Pensions Act. This contains a new Allowance of € 2,000.00 per month and is to be § 3 No. 21 EStG . The tax exemption is to apply exclusively to income from employment. 

The allowance is taken into account directly in the wage tax deduction procedure in the payslip.

Please note:
The tax-exempt income is not subject to the progression proviso according to Section 32b of the Income Tax Act.

If the employee wants to use the allowance in an employment relationship with tax class VI, he or she must confirm to the employer that the allowance will not be taken into account in another employment relationship. Employers must add this confirmation to their payroll account.

Structure of social security contributions

The allowance is not intended to weaken the social security funds, but to strengthen their financing. In concrete terms, this means: 

• Contributions to health and nursing care insurance must continue to be paid. 
• In addition, only employers pay the contributions to pension and unemployment insurance. 
• Payments made by the employer in addition to the regular salary remain subject to contributions, provided that they are only made on the basis of the new allowance according to § 3 No. 21 EStG are tax-free. 

Detailed information on the active pension can be found on the website of the Federal government and the Federal Ministry of Finance.

The active pension with Personio Payroll 

Status of implementation with Personio Payroll

Although the Active Pensions Act came into force on 1 January 2026, the final technical design by the Federal Ministry of Finance (BMF) is not yet fully available. The final requirements determine how the tax advantages are calculated in detail and applied in the wage tax deduction procedure. 

The following points need to be clarified by the Federal Ministry of Finance: 

Prerequisite for preferential treatment

• From what point in time does a peoples qualify
• Impact on different forms of employment (e.g. part-time, fixed-term employment, multiple employment)
• What necessary documents must be submitted to check eligibility. 

Tax treatment 

• The specific calculation and monthly application of the allowance
• The procedure for an employee's entry and exit during the month
• The special features for employees working abroad

Billing process and reporting procedure 

• Requirements for reporting to the tax authorities
• Requirements for storing and tracking relevant information

The Personio Payroll team is in close contact with the responsible authorities and is continuously monitoring developments in the further procedure in order to ensure legally compliant implementation in a timely manner. As soon as all binding requirements have been supplemented by the Federal Ministry of Finance, we will inform you about the necessary further steps. 

Note
Regulatory changes often bring uncertainties in planning. We support you in making the introduction of the active pension go smoothly. For custom tax issues, we recommend consulting with tax legal advice.

FAQ

When will the active pension for Personio Payroll be available?

As soon as the final requirements of the German federal authorities are available, we will announce the schedule. We expect more detailed information from the Federal Ministry of Finance in the coming months. 

Will the Active Pension Affect My Current Payroll Settings?

No, your existing setups in Personio Payroll will remain unchanged. The active annuity is integrated as an additional feature and complements your previous billing processes.