German Pension Reform Showdown: Early Exit with a Side Job Surges as Commission Prepares June Recommendations
Published on 06/21/2026 at 13:14 | Redaktion boerse-global.de
The political battle over Germany’s pension system is heating up weeks before a key commission delivers its verdict on June 23, 2026. At the centre of the dispute: a sharp rise in workers who retire early but keep their jobs, enabled by a 2023 reform that scrapped earnings limits for early retirees.
New research from the Cologne-based Institut der deutschen Wirtschaft (IW) quantifies the shift. Among workers with at least 45 contribution years – who can draw a full pension with no deductions before the standard retirement age – the share who also hold a significant job more than doubled from 18 percent in 2022 to 26.4 percent in 2024. In 2019, only one in ten of these long-insured workers earned notable extra income.
For those with at least 35 contribution years, who can start collecting a reduced pension at 63, the proportion working alongside their pension jumped from 8 percent to 14.5 percent over the same period. And these early retirees are not just working for pocket money: in 2024, they earned roughly a quarter more than regular old-age pensioners who also remained employed.
IW economist Stefanie Seele criticised what she called conflicting signals from policymakers. “On one hand, we have a severe shortage of skilled workers. On the other, the combination of an early pension and unlimited extra earnings creates a powerful financial incentive to leave the workforce – without actually leaving,” she said. The result: the share of long-insured workers among all new pensions rose from 19.4 percent in 2020 to 24 percent in 2024, while the average entry age dropped.
Before the reform, early retirees could earn no more than €6,300 a year without having their pension reduced. Since that limit was removed, unlimited earnings are possible. A government evaluation of the policy is not scheduled until 2027.
The IW study lands at a politically charged moment. Germany’s official pension commission is due to present its recommendations on June 23, 2026. Leaked indications suggest the panel may propose linking the retirement age to life expectancy. The so-called “pension at 63” without deductions – the abschlagsfreie Rente – is said to be on the chopping block.
Two members of the Bundestag, Stefan Nacke (CDU) and Armin Grau (Greens), have already co-authored a position paper calling for the abolition of the deduction-free early pension. Their goal: dismantle incentives for early exit and keep older workers in employment longer. Additional proposals include mandatory company pension schemes and extending social insurance to mini-jobs, with exceptions for young people and pensioners.
Since January 2026, Germany has also introduced the so-called “Aktivrente” (active pension), which allows retirees above the standard retirement age to earn up to €24,000 per year tax-free. Labour market researcher Martin Brussig of the Institute for Work, Skills and Training (IAQ) is sceptical. “Even before the reform, only a small fraction of pensioners earned high amounts from work. It’s far from clear that the Aktivrente will actually mobilise many additional workers,” he said.
DIW president Marcel Fratzscher finds the overall reform proposals too timid. He calls for bolder measures against old-age poverty and more intergenerational fairness, though he broadly welcomes efforts to curb early retirement and strengthen funded pension pillars. The political path, however, remains uncertain as the commission’s verdict approaches.
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