A government-appointed pension commission has unveiled 33 recommendations to overhaul Germany’s retirement system, with the centerpiece being a mandatory capital-funded pension contribution. Starting in 2028, employees and employers would each pay between 0.5 and 2 percent of gross wages into a new state-organized fund modeled on Sweden’s AP7 standard portfolio, which has historically returned an average of 11 percent per year.
The proposal drew immediate praise from industry heavyweights and skepticism from insurers. BDI President Leibinger backed the concept, while the German Insurance Association (GDV) warned against excessive state control. GDV Managing Director Jörg Asmussen called for more competition, saying yesterday that “too rigid
Alongside the capital pension, the commission recommends linking the retirement age to rising life expectancy at a ratio of two to one. Under that formula, the regular retirement age would climb to 67.5 by 2041. The controversial “Rente mit 63” — which allows long-serving workers to retire at 63 without deductions — would be phased out, with protections for those already close to retirement.
Business groups such as DIHK and ZDH applauded the move as a step toward generational fairness. Labor leaders saw it differently. DGB Chairwoman Yasmin Fahimi and Verdi Chairman Frank Werneke argued that the change “does not adequately recognize the lifetime achievements of long-term employees.”
In a parallel push, the commission aims to strengthen occupational pensions (bAV) by expanding social-partner models — voluntary agreements between unions and employers. The first such industry-wide model launched in 2022 for the chemical sector, and the commission now recommends replicating it across other economic branches. R+V Insurance CEO Claudia Andersch welcomed the approach, noting that “social-partner models offer flexible investment options and higher return opportunities while relieving employers of administrative burdens.”
The question of whether to make company pensions mandatory remains sharply divisive. In 2023, only about 52 percent of employees subject to social insurance contributions had an occupational pension. The DGB called for compulsory company pensions for all workers, a stance backed by SPD leader Lars Klingbeil. Employer associations reject the idea, citing rising ancillary wage costs.
Public opinion, captured in a recent DEVK survey, reflects the split: 48 percent of working people favor a compulsory company pension, while 39 percent oppose it. Among supporters, most said they would be willing to contribute between 50 and 200 euros per month.
Despite the disagreements, CDU Chairman Friedrich Merz and Bundestag President Bärbel Bas have pledged to push the full package forward quickly. A first legislative anchor for the reforms is scheduled for 2027.
