Since the beginning of the year, a 13-member old-age pension commission has been working on recommendations for fundamental pension reform in Germany on behalf of the federal government. Now she’s finished. The result is a concept of around 80 pages, which consists of 33 individual recommendations. These are particularly striking recommendations: The statutory contribution-financed pension is to be expanded to include a funded additional pension, as the FAZ learned from those involved. At the same time, the so-called discount-free “pension from age 63” should no longer apply and the standard retirement age should be able to rise beyond 67 in the long term.
The commission’s report is to be officially presented on Tuesday in the presence of the Chancellor Friedrich Merz (CDU) will be presented. It was negotiated and created in a total of 20 meetings with 150 hours of meeting time. The commission was led by Constanze Janda, administrative scientist and chairwoman of the Federal Government’s Social Advisory Board, and by Frank-Jürgen Weise, the early head of the Federal Employment Agency.
In addition to other scientists, the committee included members of the Bundestag Pascal Reddig (CDU), Florian Dorn (CSU) and Annika Klose (SPD) as a representative of the coalition and in the role of deputy chair. According to reports, the various reform points were not all decided unanimously in the commission, but were nevertheless decided with large majorities that spanned the political camps.
According to the concept, in addition to the “regular” statutory pension, there will be a funded additional pension in the future. It is based on the model of the “premium pension” in Sweden and, like this, would then be mandatory for employees. For this purpose, an additional pension contribution of initially 0.5 and later two percent of gross wages should be levied. He then establishes an individual, property-protected claim to the additional pension.
Farewell to the deduction-free “pension from 63”
In order not to increase the contribution burden on employees and employers too much, the concept also envisages curbing statutory pension expenses. In particular, options for early retirement should be restricted. This particularly applies to the discount-free “pension from 63” for insured people with 45 years of contributions; it should be omitted. And insured people with fewer years of contributions who are only allowed to retire earlier with discounts will in future only be able to do so at the age of 64 instead of the current 63. In addition, the standard age limit should be able to rise to over 67 years in the future, provided that general life expectancy increases. One year more life expectancy would then lead to an increase of eight months.
In principle, the Commission wants to stick to the “holding line” enforced by the SPD for the so-called pension level and extend it beyond 2031. According to the current legal situation, decided in December, it would then expire. However, according to the plans, the security level of at least 48 percent will be met in the future in conjunction with the new capital pension. To the extent that this increases, the annual increases in the “regular” statutory pension would be dampened again by the demographic factor in order to slow down the increase in expenses and contribution rates.
New allowance for pensioners in basic security
Another reform proposal concerns pensioners who are dependent on help from tax-financed basic security due to low retirement income: Anyone who has acquired rights to a statutory pension during their working life should benefit from this in the future through a tax-financed allowance in basic security. To date, in many cases, 100 percent of the individual statutory pension has been offset against this social assistance. The commission proposes that those affected can in future receive 20 to 30 percent of their statutory pension without any deduction in addition to basic security.
The report summarizes the main goal of the joint reform work as follows: It is about proposals “that ensure reliable security in old age without permanently overburdening those paying contributions or the federal budget.” The report represents an overall concept that should be implemented as such.
There is a risk of dissatisfaction from the unions and employers
If the coalition implements the reforms as a package, as Chancellor Merz is aiming for, this will result in painful concessions for many of those involved. For the SPD, which is under particular pressure from the unions, this primarily concerns the dismantling of early retirement rules such as the “pension from 63”. At the same time, unlike in Sweden, they are traditionally suspicious of funded pensions.
At the same time, however, the Union in particular is also threatened with dissatisfaction from employers. Because of the additional contribution to the planned capital pension, the additional wage costs in the form of the pension insurance contribution will initially be higher overall than without the reform. Only a few years after the start-up phase could the overall contribution burden become more favorable.
According to the experts, entry into capital pensions should begin as early as 2028 so that it can quickly make a growing contribution to old-age security. However, as expected, the retirement of the baby boomer generation, which has now begun, will drive up pension expenditure so much by 2028 that the contribution rate will then have to rise from today’s 18.6 to 20 percent of gross wages, even without reform.
Pressure for reform due to Klingbeil’s budget woes
At the same time, however, there are growing problems for Finance Minister Lars Klingbeil (SPD) in the federal budget due to the sharply increasing federal subsidies to the pension fund, which could be dampened at least in the medium term by the recommended reform. According to the latest forecasts, the additional expenditure for the first pension package approved by the coalition in December – mother’s pension and elimination of the demographic factor by 2031 – will likely be even higher than previously expected.
The coalition had originally calculated that its pension package from 2025 would trigger additional spending totaling 30 billion euros by 2030. For the period up to 2040, she had expected a total of a good 200 billion euros in additional spending.
The Union and SPD want to develop their further political reform roadmap at a coalition meeting at the beginning of June. In addition to the pension reform package, the focus will also be on the existing concepts for health and nursing care funds as well as the flexibilization of working time regulations provided for in the coalition agreement.
