Germany's Pension Overhaul: Mandatory Funded Pillar and Retirement Age Climbing Toward 70
21.06.2026 - 13:14:02 | boerse-global.de
A 13-member commission tasked with rescuing Germany’s state pension system has unveiled roughly 30 recommendations, the most dramatic of which would force workers into a state-managed private savings plan and push the retirement age past 70 by the end of the century.
The panel, co-chaired by Constanze Janda and Frank-Jürgen Weise, will formally submit its final report to Chancellor Friedrich Merz and Labour Minister Bas on June 22. At the heart of the plan lies a fundamental structural shift: from 2028, every employee would be required to contribute to a capital-funded supplementary pension modelled on Sweden’s system.
Under the proposal, a state-run fund would collect contributions starting at 0.5% of gross wages and rising gradually to 2%. Employers and workers would split the cost equally. The commission expects annual capital returns of between €30 billion and €35 billion, helping to stabilise the overall pension level at 48% of average earnings and lift it to 50% by 2050.
Retirement Age Tied to Longer Lives
In a separate but equally consequential move, the panel recommends linking the statutory retirement age to changes in life expectancy. The so-called 2:1 model dictates that for each year life expectancy increases, eight months should be spent in work and four months in retirement. A phased increase would begin in 2032.
Current projections show the retirement age reaching 67.5 by 2041, 68 by 2051, and potentially 70 in the 2090s. The popular “Rente mit 63” – which allowed long-term contributors to retire at 63 without penalty – would be scrapped. In its place, early retirement would become possible only from age 64, and only after a health check. Hardship exceptions are planned for those with medical impairments.
Widening the Contributor Base
To shore up revenues, the commission wants to bring self-employed workers, members of parliament and corporate executives into the mandatory state pension system. For civil servants, the experts recommend restricting the status of lifetime tenure to core sovereign functions and gradually aligning their pensions with the general pension level.
The contribution rate is forecast to hit 19.9% by 2028. A new allowance for low earners in the basic income support system would exempt 20% to 30% of a person’s own pension from means-testing. Meanwhile, mini-jobs – currently popular among retirees and students – would be kept contribution-free only for pupils.
The commission also calls for reinstating the full effect of the “sustainability factor” from 2031 onward. That mechanism links annual pension adjustments to the ratio of contributors to retirees. Existing benefits such as the “Mütterrente” (a pension bonus for mothers) would be preserved – a measure Bavarian Premier Markus Söder had pushed for.
Political Horse-Trading Ahead
The government will have to inject temporary additional tax funds while the reforms take effect, the report acknowledges. The package is described as essential to maintaining intergenerational fairness and financial stability through the middle of the century. Politicians from across the spectrum are now expected to begin the arduous task of turning the commission’s blueprint into law.
