The government’s newly introduced “active pension” scheme, allowing retirees to earn up to €2,000 annually tax-free from January, is facing sharp criticism from leading economic advisors, raising questions about its efficacy and potential for legal challenges. Monika Schnitzer, head of the Council of Economic Experts, has voiced skepticism, arguing the initiative will likely generate more expensive “free-rider effects” than genuine increases in employment.
“I do not anticipate the active pension initiative to meaningfully boost employment” Schnitzer told the “Rheinische Post”. “It’s more likely to encourage those already working in retirement to simply take advantage of the new tax benefits”. This assessment suggests the policy may primarily reward those already contributing to the workforce, failing to address underlying issues of labor market participation.
Schnitzer further predicted legal action stemming from the scheme’s current limitations, which restrict access only to those in standard, socially insured employment. “The exclusion of self-employed individuals is almost guaranteed to trigger legal challenges” she stated. Expanding the program to encompass the self-employed, she warned, would dramatically escalate costs, particularly given the already advanced working ages prevalent within that sector.
In contrast, Schnitzer expressed support for the government’s plan to provide €10 monthly deposits into investment accounts for children aged six to eighteen. Acknowledging this aligns with a previous recommendation from the Council, she deemed it a positive step. However, she stressed the need for more ambitious reforms, advocating for mandatory private pension provision.
“We should go further” Schnitzer emphasized, calling for a system of compulsory private pensions coupled with an “opt-out” clause. This framework, where individuals must actively reject participation, would, in her view, compel greater engagement with long-term financial planning from a younger age, potentially alleviating the burden on the state social security system in the future. The debate surrounding pension reform highlights a deeper political struggle: balancing immediate electoral gains with the long-term sustainability of Germany’s welfare state.