Partial retirement - new option for flexible reduction in working hours before retirement in Austria

From 1 January 2026, employees will be able to apply for partial retirement, if they have reached an agreement with their employer to reduce their working hours. To do so, they must fulfil the requirements for an old-age pension and reduce their working hours by at least 25% and a maximum of 75%. However, even after the reduction in working hours, the employee must still be working above the marginal earnings threshold – 551,10 EUR per month in 2025 (Geringfügigkeitsgrenze). The employee must therefore not earn less than the marginal earnings threshold after the reduction in working hours.

The relevant old-age pensions for which the requirements must be met are the corridor pension, heavy labour pension, long-term insured pension and the regular old-age pension.

How does partial retirement work?

Partial retirement works by splitting the pension account in two. One part of the pension account will be "closed" and from this the employee receives a compensatory payment corresponding to the reduction in working hours. The other part of the pension account continues to receive the current pension contributions from the part-time employment.

For a reduction of working hours of 25-40%, 25% of the pension benefit is paid out; for a reduction of 41-60%, 50% is paid out and for a reduction of 61-75%, 75% is paid out. 

Please note: The partial retirement pension is forfeited, if the minimum required reduction in working hours is more than 10% below the required level (25, 41 or 61%) for more than three months within a calendar year. Attention must be paid to this in the event of overtime during partial retirement.

If, in addition to partial retirement, a job above the marginal earnings threshold is taken up or an income above the marginal earnings threshold is received, the entitlement to the partial pension is also lost for these periods.

If an early retirement pension is taken as partial retirement, the usual deductions apply. These amount to 5.1% per year for the corridor pension, 4.2% per year for the long-term insurance pension and 1.8% per year for the heavy labour pension. 

Conclusion

Partial retirement offers an attractive opportunity to allow older employees a smooth transition into retirement and to keep them working for longer - through a flexible reduction in working hours while simultaneously drawing a pension. The prerequisite is a mutually agreed reduction in normal working hours of between 25 % and 75 %.

If you have any questions or require individual advice on this topic, please do not hesitate to contact us at any time.