Partial Pension – Extended Part-Time Work for Older Workers

A partial pension is a combination of employment and leisure time. Partial pensions are therefore essentially not a pension benefit but a new form of part-time employment for older people.

With this scheme, insured persons who fulfil the conditions for a corridor pension and have reached the age of 62 can continue working until they reach statutory retirement age and can at the same time enjoy more leisure time.

Advantages

Partial pensions enable a reduction of weekly working hours by between 40% and 60%. A period of leisure time in one block, as is possible under certain conditions in part-time work for older employees, does not form part of the partial pension.

For the working hours which are lost, the Public Employment Service (AMS) pays the employee 50 percent wage compensation, so their pay is reduced only by half as much as their working hours. So when a person works 50 percent of their previous number of hours, they still receive 75 percent of their previous wage. The social insurance contributions, however, continue to be paid as previously for 100 percent of the person's original wage.

The entire costs arising for the employer from this arrangement are borne by the Public Employment Service.

Avoiding Deductions

Persons who take a so-called corridor pension have to accept deductions in the amount of pension they receive, which amount to 5.1 percent per year (0.425 percent per month). This means that if someone retires three years before normal retirement age they give up over 15 percent of their gross pension.

Those who carry on working in a partial pension avoid these deductions and thus increase their future pension.

Women and the Partial Pension

The partial pension scheme applies equally to men and women, but the statutory retirement age for men is 65 and for women 60. Due to the staged increase of the retirement age for women from 2024 onwards, women will only be eligible for partial pensions from 1 July 2027.

Women who continue to work after the statutory retirement age of 60 years and thus postpone taking their pensions can, however, already benefit from a bonus in the form of an increase of up to 12.6 percent in their final pension amount (4.2 percent per year for a maximum of three years).

Part-Time Work for Older Workers in Combination With a Partial Pension

Part-time employment for older workers and the partial pension can - as a subsidised period of reduced working hours with wage compensation - only be taken advantage of for a maximum of five years.