Germany offers tax incentive to retirees who stay in work

Germans who work beyond retirement age will be able to earn up to €2,000 (£1,740) a month tax-free on top of their pension under a scheme aimed at boosting economic growth.

- Kate Connolly

The Aktivrente, or active pension scheme, due to come into force in January, had been pledged by Friedrich Merz before he became chancellor five months ago.

The government, a coalition of Merz's conservative Christian Democrats and junior partners the Social Democrats, hopes the plan will encourage post-retirement working.

A draft law is expected to be approved by the cabinet today, after Merz won over Social Democrat sceptics to his plan. It will then be debated in the Bundestag.

Merz has described the measure as an attempt to take the bull by the horns after three years of economic stagnation exacerbated by a lack of skilled labour, itself a consequence of a demographic crisis.

Fewer Germans are being born and increasing numbers are entering retirement. About 9% of the workforce - 4.8 million people - are due to retire in the next decade.