The Federal Cabinet has approved the Pension Value Determination Ordinance 2026, which mandates that statutory pension payments will rise by 4.24 percent starting on July 1, 2026. The Federal Ministry of Labor announced this decision on Monday, although the adjustment remains subject to the approval of the Bundesrat (Federal Council).
Federal Minister of Labor, Bärbel Bas (SPD), stated that the pension adjustment is “good news” for retirees because it allows them to participate in the “wealth development of the working population”. She emphasized that linking the statutory pension to wages ensures the system’s reliability and highlighted the importance of a stable pension system, especially during uncertain times.
This pension reform, part of the 2025 Pension Package, also extended the pension level floor until July 1, 2031. Central to calculating the pension adjustment was the relevant wage development of 4.25 percent. This figure is based on data from the Federal Statistical Office regarding the development of contributions required from insured persons. The increase will be implemented via the Pension Value Determination Ordinance 2026, taking effect on July 1, 2026.
The pension reform approved in 2025 is expected to cost the federal government significantly more than initially planned in this and next year. According to a statement from the German Pension Insurance, the pension level set at 48 percent this year will generate additional costs of 408 million euros, which the federal government must transfer to the pension fund. For 2027, this figure is projected to reach 816 million euros, leading to total additional costs of approximately 1.2 billion euros.
The ordinance governs the usual pension increase occurring on July 1st. As a result, pensions will rise by 4.24 percent this summer, which was higher than the expected 3.7 percent. This variance is attributed to labor wages from the previous year rising more sharply than anticipated and contributing to the pension calculation.
A ministry spokesperson noted that these additional costs would now have to be covered as an “extraordinary expenditure” in 2026. Furthermore, the additional reimbursement amount needed for 2027 must still be incorporated into “discussions between the federal government regarding the core figures of the federal budget”.
