After intense debates between younger and older lawmakers, Germany’s Bundesrat approved a landmark pension reform on 19 December 2025, following its earlier passage in the Bundestag. The reform package includes measures to stabilize the pension level until 2031, expand maternity benefits, introduce the new “Active Pension” to encourage work beyond retirement age, and strengthen occupational pensions.
A central feature of the reform is the stabilization of the pension level at 48 percent of the average income until 2031. This “hold line” is designed to prevent a decline in pensions and ensure that benefits remain closely tied to wage development. By fixing this level, the government seeks to provide retirees with predictable and sustainable income, avoiding the risk of pensions falling behind earnings. The reform also prevents the decoupling of pensions from wages, securing financial stability for both current and future retirees.
The reform introduces Mütterrente III, which ensures full recognition of parental caregiving for all children, including those born before 1992. Previously, the acknowledgment of child-rearing periods in pension calculations varied depending on the child’s birth year. Under Mütterrente III, parents will receive full credit for up to three years of caregiving per child, fully equalizing benefits. These provisions are set to take effect in 2027. If technical implementation delays occur, retroactive payments will be made to ensure all eligible parents receive the benefits they are entitled to.
To incentivize work beyond the standard retirement age, the reform introduces the Active Pension. Individuals who voluntarily continue working past retirement can earn up to €2,000 tax-free. Additionally, the reform removes the previous “employment continuation ban,” allowing older workers to continue employment with the same employer on a temporary basis without needing a formal justification. These measures aim to encourage continued workforce participation among older adults and support the labor market.
The Bundesrat also approved the second Occupational Pension Strengthening Act, designed to further promote employer-supported retirement savings. By enhancing the framework for occupational pensions, the reform seeks to improve long-term financial security and complement the public pension system.
With the Bundesrat’s approval, the Federal President can now sign the law into effect. Once published in the Federal Law Gazette, most provisions of the reform, including pension stabilization, the Active Pension, and occupational pension measures, will take effect on 1 January 2026. The Mütterrente III changes are scheduled for 2027, with retroactive payments where necessary.
This comprehensive package provides financial stability for retirees, fully recognizes parental caregiving, encourages continued employment beyond retirement, and strengthens occupational pensions, representing a major update to Germany’s retirement system.
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