Germany's government-appointed pension commission is preparing to present one of the most significant overhauls of the country's retirement system in decades, a package that would gradually raise the statutory retirement age to 70 by the end of this century, introduce a capital-funded pension pillar, and expand the contributor base to include politicians and the self-employed.
According to information obtained by Bild am Sonntag from within the commission, the retirement age would be linked to rising life expectancy starting in 2032. From 2042, the threshold would increase by half a year every ten years, meaning that by the 2090s, the standard retirement age would reach 70. In practice, this means children currently starting school would be the first generation required to work until that age.
The early retirement option available after 45 years of contributions would be abolished under the proposals. However, people who are unable to continue working for health reasons would be granted easier access to early retirement.
A new capital pension component, funded in part through stock market investments, forms a central pillar of the commission's reform blueprint. Initially, one percent of gross wages would flow into this capital pillar, split equally between employees (0.5 percent) and employers (0.5 percent). That contribution rate would later rise to two percent, again split evenly.
The commission's projections indicate that by 2040, the combined pension level, comprising both the pay-as-you-go and capital components, would reach 50 percent of wages by 2050. At the point of retirement, the existing minimum replacement rate of 48 percent would still apply; the sustainability factor would then modestly reduce the pension level over the course of retirement, with the capital component designed to offset that decline.
A mandatory occupational pension was not included in the package. Experts involved in the process indicated this option would be more administratively complex than embedding the capital component within the existing pension insurance system.
The commission also proposes reinstating the sustainability factor, a mechanism that adjusts annual pension increases in line with the ratio of contributors to recipients. While this would help contain future contribution rate increases, it would also result in more modest annual pension rises for retirees.
In a significant structural change, the commission recommends broadening the pool of pension contributors. Under the proposals, members of the Bundestag and state parliaments, self-employed individuals, and chief executives of publicly listed companies would all be required to pay into the statutory pension fund. Civil servants would remain outside the system for the time being.
The commission also advocates for abolishing the exemption from pension contributions that currently applies to mini-jobs, low-wage employment arrangements capped at a monthly income threshold. Under the new rules, only school-age students earning up to €603 per month would retain the exemption. All other workers in such arrangements would be required to take up positions with full pension contributions. The measure is explicitly aimed at reducing old-age poverty among women.
The 13-member commission on old-age security has been deliberating on reforms to the German pension system since January, against the backdrop of demographic pressures threatening its long-term financial sustainability.
The commission's report is scheduled to be handed to the federal government at 9:00 a.m. on Tuesday at the Chancellery, according to deputy government spokesman Steffen Meyer. Chancellor Friedrich Merz (CDU) and Social Affairs Minister Bärbel Bas (SPD) are expected to address the press following the handover. The two commission co-chairs, Frank-Jürgen Weise and Constanze Janda, will then hold a separate press conference to outline the proposals in detail.
From breaking news to thought-provoking opinion pieces, our newsletter keeps you informed & engaged.
