According to a study published by the IGES Institute for the “Initiative Neue Soziale Marktwirtschaft” (INSM) and reported by the newspaper “Bild”, the overall contribution rate for social security is projected to rise from the current 42.8% to 49.3% by 2035, even when considering the planned reforms.
The report indicates that if the scheduled reforms in the health and care sectors are implemented, the contribution rate will reach 47.5% by 2035, provided the federal government does not introduce further structural reforms within the social security system. The study points out that the total contribution rate is slated to rise to 45.4% as early as 2028. Crucially, if a capital pension scheme is introduced at the same time, the overall contribution rate is projected to climb to 49.3%.
Thorsten Alsleben, Managing Director of INSM, described this new prognosis for social contributions as an “alarm signal.” He warned that this trajectory would “unreasonably increase the cost of labor” and potentially make Germany appear unappealing to investors. Alsleben noted that if in 2035 employees and employers together must pay nearly half of the gross salary toward social security, working in Germany will become “more expensive,” leaving workers with “less net income.”
The most significant proportional increases are expected in the pension contributions. The pension contribution rate alone is set to rise from its current 18.6% to 20.9% by 2035. Furthermore, the contribution rate for unemployment insurance is scheduled to increase from 2.6% to 4.4%.
