The plan would allow early pensioners to earn as much as they did while working full-time via a combination of retirement payments and money they earn in the workforce, according to the Süddeutsche Zeitung on Tuesday.
Current rules limit them to earn an additional €400 a month, with anything on top of that taken out of their pensions.
The paper said German Labour Minister Ursula von der Leyen from the ruling Christian Democratic Union (CDU) was improving her original plan for early pensioners.
Originally her plan was to cap early pensioner earnings at the average of what the person earned over their last three working years. The improved plan, according to the paper, now allows early retirees to earn an average of their last 15 years in the workforce.
This could make a significant difference in allowable income because in general the average wage over the last 15 years is higher than what it was over the last three, the paper said.
As an example the paper said an average early retiree might earn €2,555 in gross monthly earnings.
If the person retires at 63, he or she would get about €1,011 in monthly pension payments. These take into account reductions for the early retirement.
With the current rule that person could earn an additional €400, that would come to a capped monthly total of €1,411. If the person were to earn any more, their pension would be correspondingly reduced. The new plan changes that.
The Federal Association of German Employers welcomed von der Leyen's the new plan. “When the coalition wants to relax what people can earn additionally compared to before that is certainly something we welcome,” the group told the newspaper.
But the employers are calling for the complete removal of restrictions of extra earnings for early pensioners. “They sometimes act for those concerned like a prohibition against working and are difficult to implement,” the group said.
Annelie Buntenbach of the German Confederation of Trade Unions said the coalition plan did not solve the early retirement problem – namely when workers leave the workforce early, their pension payments are permanently reduced.
And it is now even worse than before, she noted. The retirement age has recently been increased to 67. The earliest point someone can retire and get a pension is 63. But the law says for every month of early retirement, pensions are reduced by 0.3 percent, a DGB spokesman explained.
Before, a person retiring at 63 was stopping work 24 months early resulting in a 7.1 percent pension reduction. But now, with the retirement age at 67, a person retiring at 63 is 48 months early and loses 14.2 percent of their pension.
Von der Leyen's plan to relax rules on additional income fails to tackle this, Buntenbach said.