The Federal Government’s Pension Commission handed over its final report on Tuesday morning to Federal Chancellor Friedrich Merz (CDU) and Labor Minister Bärbel Bas (SPD). The experts’ proposals, which had already been made public over the weekend, include several fundamental changes.
Among the key suggestions is the prospect of introducing a retirement age of 70 and raising the standard pension level to 50 percent through a new capital-based pension scheme. This system would initially require one percent of the gross wage to contribute to the capital pillar (0.5 percent from the employee and 0.5 percent from the employer). Later, the contribution rate for this capital pension is planned to increase to two percent (one percent from the employee and one percent from the employer). The commission estimates that this planned new capital pension would generate significant extra payments for insured persons in the long term-specifically, over 770 euros more in pension over 45 years.
Furthermore, the commission proposes reintroducing the sustainability factor in 2031. This mechanism adjusts the annual pension increase based on the development of contributors, causing the pension level to decrease over the years of receipt. However, the new capital pension is designed to offset this decline. Sources within the government indicated on Tuesday that the standard pension level will be stabilized at 48 percent for new pensioners beyond 2031 through a “mix of measures.” Additionally, it is projected to rise again for those starting retirement in the 2040s, potentially reaching over 50 percent by 2060.
According to the experts, the retirement entry age should be linked to the expected increase in life expectancy starting in 2032. From 2042 onward, the entry age would increase by half a year every ten years. The age of 70 would not come into effect until at least 2092.
Other provisions address contributions and access to old-age benefits. The proposals include requiring parliamentarians to also contribute to the pension fund and largely eliminating the “mini-jobs” that are currently exempt from pension contributions. Additionally, the early retirement without deductions for those with particularly long service-known as the “pension at 63”-is recommended for abolition.
The next step requires the Federal Government to draft the proposals into legislation. Changes may still occur during the parliamentary process.
