With demographic changes placing increasing pressure on the financing and stability of the pension system, this package is intended to provide relief. Additional reforms have already been announced. Here are the key questions and answers regarding the current state of the reform:
Why Is the Pension System Under Pressure?
An increasing number of people are receiving pensions, while the number of contributors to the statutory pension scheme is declining. Life expectancy is also rising, meaning pensions must be paid out over a longer period. As a result, the pension fund is under significant strain. A fundamental reform is therefore necessary. Even before a reform commission has been established, the federal government has drafted an initial package of measures, which still needs to be approved by the Bundestag.
Who Will Benefit From the Proposed Changes?
Primarily, individuals who are already retired or nearing retirement stand to benefit from the new measures. The coalition government — comprising the SPD and CDU/CSU — plans to maintain the current pension level at 48 percent of average earnings at least until 2030. This so-called “minimum threshold,” in place since 2018, is to be extended.
Mothers with children born before 1992 are also set to benefit: starting in 2027, the pension system will credit an additional six months of child-rearing time, increasing the entitlement from 2.5 to 3 pension points. This measure — often referred to as the “mothers’ pension” — was a key campaign promise of the CSU. The annual cost is estimated at around 5 billion euros, funded through tax revenues.
Who Will Bear the Costs?
In the future, both employers and employees may face higher contribution rates to the statutory pension system. The current total contribution rate is 18.6 percent of gross wages.
In previous decades, the pension fund was largely self-financing — but those days are over. Today, the government must contribute substantial sums from the federal budget. Last year alone, this subsidy totaled around 116 billion euros, with an upward trend. These funds come from general tax revenue.
What Additional Reform Proposals Are Being Discussed?
One proposed approach is to raise the retirement age further to reduce the number of pension years. Federal Economics Minister Katherina Reiche (CDU) has expressed openness to this idea. However, within the CDU, the proposal remains controversial. Labor Minister Bärbel Bas (SPD) opposes raising the retirement age and instead advocates for broadening the base of contributors: for example, self-employed individuals and civil servants could be required to pay into the statutory pension scheme.
Some economists are also proposing new models. One idea is the introduction of a “Boomer Tax” (Boomer-Soli), where baby boomers — those born during population surges — would pay a special levy on retirement income. These and other measures will be evaluated by a pension reform commission scheduled to begin work next year. The goal is to present a comprehensive plan for a sustainable pension reform by early 2027.
What Else Is Planned?
A second part of the pension reform package is expected in the fall, which will include further initiatives:
- “Active Pension”: This proposal aims to make continued work during retirement more attractive by exempting monthly income up to 2,000 euros from taxes.
- “Early Start Pension”: This measure is designed to boost private retirement savings for children and adolescents, offering a monthly state subsidy of six to ten euros, paid directly into private pension accounts.
- Occupational Pensions: The government also wants to strengthen employer-sponsored pensions. Currently, only about half of all employees subject to social insurance have an occupational pension. New incentives are being considered to expand this.
Not included in the new pension package is the “Generational Capital” concept, proposed by the FDP. This idea involved using government investments in stock markets to generate long-term returns in support of the pension system. It was a central part of the FDP’s pension policy during the previous coalition government (Ampelkoalition).
How Has the Pension Level Changed in Recent Years?
The pension level — officially referred to as the “gross replacement rate before taxes” — is a statistical indicator comparing the standard pension (after 45 years of contributions at average income) to the average income of all employed individuals. It is a key measure of the performance of the statutory pension system.
The highest recorded pension level was 59.8 percent in 1977. The equalization of pension levels between eastern and western Germany was only completed in 2023. According to the 2024 Pension Insurance Report from the Federal Ministry of Labor and Social Affairs, the development of the pension level and standard gross pension since 2009 is as follows:
Year Pension Level Monthly Gross Standard Pension
2009 52,0 % 1.224 €
2010 51,6 % 1.224 €
2011 50,1 % 1.236 €
2012 49,4 % 1.263 €
2013 48,9 % 1.266 €
2014 48,1 % 1.287 €
2015 47,7 % 1.314 €
2016 48,1 % 1.370 €
2017 48,3 % 1.396 €
2018 48,1 % 1.441 €
2019 48,2 % 1.487 €
2020 48,2 % 1.539 €
2021 49,4 % 1.539 €
2022 48,1 % 1.621 €
2023 48,2 % 1.692 €
2024 48,1 % 1.751 €
2025 48,0 % 1.808 €
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