Many retirees seek to remain active in the workforce, and a partial pension offers them flexibility. Eligible individuals can apply for a partial pension, allowing them to receive between 10% and 99.99% of their pension while continuing to work. This option helps mitigate deductions for early retirement, provides potential tax advantages, and ensures access to benefits like sick pay. Transitioning between full and partial pensions is straightforward, accommodating changes in personal circumstances.
Understanding Partial Pension Options for Retirees
Many individuals are eager to stay engaged in the workforce, even after reaching retirement age. For these proactive individuals, opting for a ‘partial pension’ can be an advantageous choice, offering a range of benefits.
As employees approach retirement, they often find themselves contemplating their options regarding the statutory pension. Upon reaching the standard retirement age or opting for early retirement, they can choose between a traditional ‘full pension’ or a ‘partial pension’.
Who Can Apply for Partial Pension?
Any insured individual eligible for an old-age pension through statutory pension insurance can apply for a partial pension. This includes those eligible for the standard pension starting at age 67, as well as those who may qualify for an early pension at age 63 with deductions.
According to Gundula Sennewald from the German Pension Insurance, the application process mirrors that of a full pension. During the initial application for an old-age pension, applicants are prompted to indicate whether they wish to receive a full pension or a partial pension, allowing them to make an informed decision right from the outset.
Individuals nearing retirement often desire to begin their pension benefits sooner.
Retirees have the flexibility to select the percentage of their pension they wish to receive as a partial pension, with a minimum of ten percent and a maximum of 99.99 percent. This nearly full pension option can be particularly beneficial in specific situations. Sennewald notes that giving up just 0.01 percent of the pension can be advantageous for caregivers at retirement age because contributions continue to be paid by the care fund, further enhancing their old-age pension.
After years of dedicated work, many employees are keen to retire as early as possible.
The minimal deduction for a partial pension comprising 90 percent or more is often only a few euros, or sometimes just cents, each month. The perks of being a partial pensioner extend to those who choose to continue working, as they remain eligible for sick pay in the event of extended illness, unlike full pension recipients.
For those contemplating early retirement, opting for a partial pension can also help mitigate the typical deductions associated with early retirement. As pension expert Maik Bäker explains, “If I aim to retire at 63 with deductions, that deduction will apply permanently to all my pension points.”
The baby boomer generation is transitioning into retirement, prompting many companies to seek ways to retain their senior employees.
Deductions are exclusive to partial pensioners.
Former pension advisor, now known as ‘Pension Fox’ on YouTube, emphasizes that if someone requires extra income to meet their needs, they can utilize a partial pension while incurring deductions solely on the pension points they draw from this partial pension.
Thus, applying for a partial pension around age 63 can contribute to a higher statutory pension when reaching the standard retirement age.
While the Left Party cautions against forcing individuals into early retirement due to low pensions, it’s important to note that early retirement through a partial pension may also offer tax benefits. With the gradual implementation of deferred taxation, a growing percentage of pensions in Germany will be subject to taxation. By 2025, 83.5 percent of pensions will be taxed, increasing to 100 percent by 2058.
Bäker explains, “The tax-free portion of the pension is determined by the retirement year.” Therefore, individuals planning to work until age 67 might consider applying for a ten percent partial pension at age 63 to secure a greater tax allowance over time.
As various political parties present their federal election programs, the Greens are also contributing to the discourse.
For partial pensioners who may receive a company pension, it’s essential to consult with their employer, as the company pension might be suspended until the individual reaches full pension status, depending on the legal framework.
The decision to opt for a partial pension can be made during the pension application process, but it’s not mandatory. Insured individuals can start with a full pension and later transition to a partial pension if circumstances change, such as needing to provide care for a relative or returning to work.
The proposed pension reform by the coalition has not materialized due to the coalition’s dissolution.
Switching between full and partial pensions can be done informally. The amount of the partial pension can be adjusted, and individuals can make multiple transitions between full and partial pensions. This adjustment is simply requested by writing to the pension insurance provider, and such changes take effect after one month.