🏛️ Aktivrente: A German Blueprint for Active Ageing — and Why the UK Should Follow

Germany’s “Aktivrente”: A Blueprint for Active Ageing the UK Can’t Afford to Ignore

Germany’s 2026 Aktivrente will let pensioners earn €2,000/month tax-free. Steve Conley argues the UK should adopt a similar Active Pension Allowance to extend working lives, boost growth, and reduce fiscal strain.

Germany has recognised a quiet revolution already underway: older people can, and increasingly want to, remain economically active long after reaching retirement age.
Its new proposal — the Aktivrente, or active pension — offers a powerful model for the UK as we wrestle with labour shortages, an ageing population, and the escalating fiscal costs of later life.

🇩🇪 What Germany Is Doing

From 1 January 2026, Germany plans to let those who have reached their statutory pension age continue working and earn up to €2,000 per month tax-free — equivalent to €24,000 per year.
This “active retirement” income would sit outside normal income tax bands, creating a clean, visible incentive for pensioners to stay in work.

Key features:

Applies to anyone beyond statutory pension age (currently 67 in Germany).
Encourages flexible “phased retirement” without penalising work.
Intended to relieve labour shortages and sustain public finances.
Estimated to benefit around 230,000 pensioners in the first wave, with a potential fiscal cost of €2.8 billion per year.

By 2039, more than 13 million Germans will be over state pension age — roughly one-third of today’s workforce. The Aktivrente is a pragmatic attempt to turn this demographic shift from a liability into an opportunity.

🇬🇧 The UK’s Parallel Challenge

The UK State Pension age is 66, set to rise to 67 between 2026 and 2028.
At the same time:

Over 12 million people are already above state pension age.
The dependency ratio — working-age adults per retiree — is falling fast.
The Treasury faces rising costs from the triple lock, healthcare, and social care.

Despite this, the system disincentivises continued work. Once you reach SPA, you pay income tax as before, often with no employer pension contributions and no clear post-retirement earning allowance. The message is: stop contributing, start drawing.

We can do better.

💡 A UK “Active Pension Allowance”

Drawing inspiration from Germany, the UK could trial an Active Pension Allowance in 2026, coinciding with the SPA rise. The principle:
reward contribution, not withdrawal.

Policy options:

Tax-Free Post-Retirement Band: Allow everyone over SPA to earn, say, £20,000 per year tax-free from work.
NIC Holiday: Exempt employees and the self-employed beyond SPA from National Insurance on earned income.
Hybrid Model: Combine a modest tax-free allowance with an NIC holiday for broader participation.

To keep the scheme fair:

Include both employed and self-employed income to avoid discrimination.
Introduce a taper at higher incomes to target low- and middle-earners.
Pair it with skills-refresh vouchers and flexible work grants to extend productive capacity.

⚖️ Why It Matters

Extends Human Capital
Older workers retain expertise, social networks, and productivity that remain undervalued. Extending their participation boosts GDP and raises the present value of future earnings — the core of national wealth.
Reduces Fiscal Strain
Later-life work delays pension drawdowns, stabilises tax receipts, and mitigates demand on means-tested benefits and care budgets.
Promotes Dignity and Well-Being
Employment in later life correlates with better health, purpose, and cognitive longevity — delivering savings for the NHS and social care.
Supports Intergenerational Balance
Keeping older people active sustains economic growth and eases the tax burden on younger generations.

📈 A Strategic Shift in Pension Policy

Traditional pension policy focuses on financial capital — saving, investing, and drawing down. The Aktivrente reframes this around human capital — preserving earning capacity and contribution.
It’s the same philosophy underpinning the Academy of Life Planning’s work: aligning financial systems with real human value.

A well-designed Active Pension Allowance could form part of a broader UK agenda to:

Redefine retirement as a flexible transition, not an exit.
Integrate pensions, work, and lifelong learning into one continuum.
Rebalance the social contract between generations.

🧭 A Call to Policymakers

The UK’s ageing population is not a crisis — it’s an untapped resource.
By rewarding older citizens who choose to keep contributing, we can expand prosperity, strengthen public finances, and model a system that values participation over dependency.

Germany’s Aktivrente shows the way.
It’s time the UK explored its own Active Pension Allowance — turning later life from a fiscal challenge into a civic opportunity.

Sources:

Scheme basics and 2026 target: European Pensions; iamexpat; Vorwärts. European Pensions+2IamExpat in Germany+2
Distributional/fiscal analysis: DIW Weekly Report; IW Köln short report. DIW Berlin+1
Demographic wave to 2039: Destatis release (13.4m to reach SPA by 2039). Destatis
UK SPA status and timetable: UK Government (GAD news; Call-for-evidence page). GOV.UK+1