Germany’s Looming Pension Showdown: DAX Liabilities Swell as Unions Demand Mandatory Coverage for 20 Million Workers

DAX pension liabilities hit €428.8B, funding at 55.3%. Union demands mandatory employer pensions for 20M workers, sparking industry backlash.

The financial pressure on Germany’s biggest companies is building. Pension obligations for DAX-listed firms climbed 7 percent in the second quarter of 2026, hitting €428.8 billion, according to Willis Towers Watson. The driver: a discount rate that dropped to 1.70 percent. The average funding level now stands at just 55.3 percent.

Against this backdrop, the German Trade Union Federation (DGB) has launched a sweeping call to action. On Saturday, DGB chair Yasmin Fahimi demanded a mandatory occupational pension (betriebliche Altersvorsorge, or bAV) for the roughly 20 million employees who currently lack any company-based retirement savings. The scheme must, she insisted, come with compulsory employer co-financing. A detailed proposal is expected by the end of June.

European Comparison Exposes Germany’s Gap

Union leaders point to other European countries where total pension contribution rates often exceed 20 percent. In Germany, the picture is uneven. North Rhine-Westphalia already covers more than half its workforce with a bAV. But small and medium-sized enterprises, non-unionised shops and the service sector show deep shortfalls.

Many employers use the bAV as a retention tool, but the DGB argues that stronger collective bargaining agreements are the only way to achieve universal coverage. Currently, most bAV plans rely on salary sacrifice — employees forgo part of their pay. Since 2019, employers have had to add at least 15 percent to new contracts if they save social insurance contributions through the arrangement.

For the current year, tax-free ceilings apply: up to €338 per month can be contributed without incurring tax or social security charges; up to €676 per month can be tax-free (with social charges due). Taxes are deferred until the payout phase. Five different implementation channels exist.

Tax Plan Fans Controversy

The pension demand is part of a broader DGB economic package. The federation is calling for a corporate income tax hike to 25 percent, a net wealth tax starting at €1 million in assets, and a one-time levy of 10 percent on wealth above €10 million. Together, the proposals aim to unlock an estimated annual revenue potential exceeding €120 billion.

Employers are pushing back hard. On Friday, Gesamtmetall chief Stefan Zander labelled the plans “hostile to performance” and questioned the principle of social partnership that has long characterised German industrial relations. Even the DIW research institute has chimed in: President Marcel Fratzscher endorsed a 2 percent wealth tax on large fortunes, which he estimates could yield roughly €42 billion per year.

Meanwhile, the Finance Ministry is preparing to expand state-subsidised private pension coverage to self-employed workers and freelancers by 2027. The DGB, however, is also voicing concern over draft reform papers on long-term care, which it claims amount to an austerity package — including plans to reduce pension contributions for family caregivers.