Pension reform proposals demand extreme changes
In the heart of Europe, Germany is grappling with the impending challenges of an aging population and the subsequent strain on its pension system. A recent study commissioned by the Friedrich-Naumann Foundation has shed light on the potential consequences if comprehensive reforms are not implemented.
The study predicts that without significant changes, pension costs could potentially exceed 11% of the social product by 2050. To prevent this, the study suggests that a comprehensive pension reform is necessary to keep pension costs at 10% of the social product by 2050.
The coalition agreement of the black-red federal government promises a pension level of 48% and a retirement age of 63 years. However, the study implies that these promises could be impacted by the need for comprehensive pension reform. The economists demand the abolition of the pension at 63, and linking the retirement age to life expectancy.
As of mid-2025, comprehensive pension reform in Germany is actively underway. The government is focused on several reforms, including guaranteeing a statutory pension level of at least 48% of average income through 2031, expanding pension eligibility, and introducing new pension schemes. However, no official extension of the statutory retirement age beyond 67 has been enacted.
Demographically, Germany faces an aging population with a median age of 46.7 years and projections that by 2040, one-quarter of the population will be at least 67 years old. This has led to political debate about working longer to sustain the pension system, but specific legislative changes raising the retirement age past 67 have not been adopted as of mid-2025.
The study, authored by Marcel Thum, head of the ifo Institute in Dresden, warns that without reforms, the contribution rate in the statutory pension insurance could increase to 22% by 2050, with serious consequences for employees and companies. Difficult decisions regarding the pension system have been postponed into the future, according to these economists.
Meanwhile, welfare dependency among pensioners has increased, highlighting socioeconomic strains. Additionally, efforts to adjust occupational pensions and create a large state buffer fund have been discussed but remain unresolved.
In sum, while Germany is progressing on several fronts of pension reform, the explicit legal link between retirement age and life expectancy has not yet been significantly altered, and political debate about raising retirement age beyond 67 is ongoing. If reforms are not implemented, the study suggests that the contribution rate in the statutory pension insurance could rise significantly by 2050, with serious consequences for both employees and companies.
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- The study suggests that comprehensive pension reform is necessary in Germany to prevent pension costs from potentially exceeding 11% of the social product by 2050, as currently predicted.
- If reforms are not implemented, the study warns that the contribution rate in the statutory pension insurance could increase to 22% by 2050, posing serious challenges for both employees and businesses, and potentially impacting the general-news, finance, business, and politics sectors.
