Germany's pension reform proposals spark debate over retirement age and funding

The German government’s pension commission has presented a 33‑point reform plan built around a hybrid system: a modest increase of the statutory pension level to 48 % of average earnings until 2031, a new compulsory capital‑pension component starting in 2028, and a gradual linking of the statutory retirement age to life expectancy – projected to rise to about 70 years by the 2090s. The plan also calls for the abolition of the “Rente mit 63” early‑retirement option and higher contribution rates, with a total statutory contribution potentially reaching 22 % of wages by 2031.

In response, the German Trade Union Confederation (DGB) presented its own alternative. The DGB commission proposes raising the pension level to 53 % of earnings, introducing a mandatory occupational pension funded by employers at 2 % of gross wages, and financing the reforms through a “demographic surcharge” on high incomes, wealth and capital gains. The DGB rejects any increase in the retirement age and emphasizes a broader wealth‑distribution approach.

Economists and social groups have warned of short‑term economic costs. Studies by the IMK and WSI estimate that the capital‑pension could shave up to 250 000 jobs and reduce GDP growth by about 1 % (≈ €45 billion) during the transition. The Sozialverband Deutschland (SoVD) cautions that tying the retirement age to life expectancy could exacerbate inequality and increase the risk of old‑age poverty. Political debate within the coalition continues, with the SPD and CDU debating the balance between fiscal sustainability and social protection.