Bas's pension level guaranteed at 48% assurance.
Berlin - Federal Minister of Labour and Social Affairs, Barbara Steffens (SPD), is looking to secure a pension level of 48% for the citizens with a hefty investment, as promised. The bill is currently under discussion within the federal government. Older workers will encounter fewer barriers to continue working if they desire.
In an interview with ARD Tagesschau, Steffens stated, "For citizens, this means stability and the security of a stable pension after a long career." The bill proposes, "The cap on pension level at 48% will be extended until 2031, preventing the decoupling of pensions from wages until then."
Understanding the Pension Level
The recent pension increase has already incorporated the temporary cap. From July 1, over 21 million German pensioners will receive increased benefits of 3.74%. The pension value is regulated to reach the legally prescribed pension level of 48%.
The pension level represents the pension security relative to wages. Specifically, it expresses the ratio of average income to a "standard pension." A stable pension level ensures that the statutory pension keeps pace with wage growth. "The additional expenses incurred by the pension insurance fund will be reimbursed from federal tax funds," the bill states, " preventing impacts on the contribution rate."
The Price Tag
Aging society puts pressure on the pension system. In the coming years, fewer employees will be contributing to the pension fund while more individuals will be receiving retirement benefits.
Official calculations suggest that, without changes, the pension level would decrease from the current 48% to 46.9% by 2030 and to 44.9% by 2045. Retirees' pensions would increase at a slower pace compared to employed individuals' incomes. To maintain a stable pension level, the SPD had aimed to avoid such a decrease. Employers, however, worry about surging wage-related costs. Instead, the plan is to divert large amounts of tax funds.
According to the bill, the reimbursement of these additional costs and other measures from 2029 onwards will initially lead to an additional expenditure of 4.1 billion euros. By 2030, the costs are forecasted to rise to 9.4 billion euros, and by 2031 to 11.2 billion euros.
The federal government plans to submit a report on the development of the contribution rate and federal subsidies in 2029. This report will examine what measures are required to maintain the pension level of 48% beyond 2031.
Delayed Parental Allowance Payments
The statutory pension insurance period for child-rearing will be extended by six months for children born before 1992, totaling three years. The extended parental allowance will only be disbursed from 2028 due to the technical implementation requiring two years after the law is announced.
To facilitate the return of individuals who have reached retirement age to their previous employment, the current ban on continuation will be lifted.
[2] The proposed pension level of 48% forms part of the government's policy to keep the pension replacement rate stable and ensure retirees receive nearly half of their average earning during their working life.
[3] Germany is investing around €190 billion in the social security and pension system in 2025 alone, which is 8% more than in 2024. However, sources do not explicitly state the total cost to the federal government to maintain the pension level at 48% until 2031.
The government's plan to maintain a pension level of 48% for citizens, as proposed by Federal Minister Barbara Steffens, is part of the broader policy to keep the pension replacement rate stable, ensuring retirees receive nearly half of their average earnings during their working life (sentence 1). To finance this generous pension system, Germany is set to invest €190 billion in social security and pension systems in 2025 alone, marking an increase of 8% compared to 2024 (sentence 2). Further investigations into the total cost to the federal government to maintain the pension level at 48% until 2031 are promised in a report to be submitted in 2029.
