Partial retirement (Altersteilzeit)

Altersteilzeit (partial retirement) allows older employees in Germany a gradual transition into retirement (Partial Retirement Act, AltTZG).

Requirements:

• Age: at least 55
• Employment: at least 1,080 days subject to social security in the last 5 years
• NO legal entitlement – a voluntary agreement with the employer

The 2 models:

1. Block model (used almost exclusively in practice):

• 1st half (work phase): work full-time, half salary
• 2nd half (release phase): don't work, still half salary
• Example: 6 years of partial retirement = 3 years working full-time, then 3 years off

2. Equal distribution model:

• Half working hours throughout (e.g. half days or fewer days/week)

Salary and top-up:

• The employer tops up to approx. 80% of previous net pay
• The top-up is free of social security contributions and only taxable under the progression clause
• Pension contributions: on approx. 90% of the previous salary (employer pays at least 80% of the previous pension contributions)

Effect on your pension:

• Approx. 10% less pension increase than with continued full-time employment
• Weigh it up: a lower pension vs. earlier freedom

Max. subsidy period: 6 years. Insolvency protection: the employer must secure the credit balance.