Tax-free does not mean contribution-free
A common misconception about the Active Pension: many believe the tax-free wage is completely free of deductions. That is not the case. The Active Pension exempts only from income tax – social contributions remain unaffected. Anyone who wants to understand exactly what remains net has to look at both levels separately.
Our <a href="/en/active-pension-calculator">Active Pension Calculator</a> cleanly separates these items and shows you how much goes to health and care insurance and how high your real net benefit is.
These contributions remain
Contributions to the statutory health insurance and to long-term care insurance are still due on your wage. The health insurance contribution consists of the general rate and the fund-specific surcharge. For long-term care insurance, childless people pay a surcharge that is borne solely by the employee.
These contributions are the price for staying insured and being able to claim benefits. They apply regardless of whether your wage is tax-free or not.
These contributions disappear
The big advantage in retirement age: after the statutory retirement age, the employee contributions to pension and unemployment insurance no longer apply. As an employee, you no longer have to pay either item. This noticeably relieves the wage – in addition to the tax exemption.
It is precisely this double effect that makes continued work in retirement so attractive: fewer social contributions and no income tax on wages up to 2,000 euros mean that an unusually high proportion of the gross remains as net.
A look at the numbers
At a wage of 1,500 euros the entire tax portion disappears, while health and care insurance remain the only significant deductions. As a result, the net is considerably closer to the gross than for a regularly employed younger colleague with the same salary. How large the difference is in your case depends on your health fund's surcharge and on whether you pay the care surcharge.
Why this is still fair
There is a good reason for the social contributions remaining: they secure your health and long-term care insurance protection. Policymakers deliberately designed the Active Pension as a tax exemption and not as a complete exemption from contributions, so as not to burden the social funds. For you this means planning certainty: the insurance protection stays, the tax benefit comes on top.
Conclusion
The Active Pension lowers the tax burden, not the social contributions – and combined with the dropped pension and unemployment contributions, a lot still remains. The exact net amount including all deductions is delivered by the <a href="/en/active-pension-calculator">Active Pension Calculator</a> at the push of a button.