German Pension Overhaul Scraps Early Retirement at 63, Introduces Swedish-Style Capital Fund
23.06.2026 - 12:56:29 | boerse-global.de
Almost half of Germany’s workforce intends to leave their jobs before reaching the legal retirement age, according to a Forsa survey of 7,000 employees. The figure climbs to 52 percent among workers aged 50 and older, and to 60 percent among those with health restrictions. Yet a government-appointed pension commission has just recommended a sweeping reform that steadily raises the retirement benchmark.
The commission’s 33-point package strikes at the heart of that mismatch. Its most controversial proposal: abolishing the so-called “Rente mit 63” – the option to retire without deductions after 45 years of contributions. In its place, the minimum age for long-term insured workers would rise to 64. The German Institute for Economic Research (DIW) calculates the measure alone would save the state €9.5 billion per year and keep roughly 125,000 skilled professionals in the labour market annually.
Under the plan, the statutory retirement age would be linked to life expectancy starting in 2031. Projections from the commission show it reaching 67.5 years by 2041 and 68 by 2051.
The demographic pressure behind the reform is stark. Data from the Federal Statistical Office, based on the 2025 micro-census, indicate that 13.3 million people currently employed or looking for work – about 30 percent of the entire labour force – will reach pensionable age by 2040. In 2025 alone, 5.5 million workers were aged 55 to 59 and 4.5 million were in the 60-to-64 bracket. Subsequent age groups, the statistics agency notes, are too small to fill the gap.
A core element of the reform introduces a capital-funded pension modelled on Sweden’s system. A state-run investment fund, financed by employee contributions, would be established. Those contributions could eventually rise to 2 percent of gross wages. The package also requires self-employed workers and politicians to pay into the statutory pension scheme, and gradually aligns civil service pensions with the general pension level. A sustainability factor that dampens annual pension increases – suspended in recent years – would be fully reactivated from 2031.
The federal government aims to push the legislation through quickly, with an in-force date as early as the beginning of 2027.
Meanwhile, the financial outlook for the current system remains sobering. The contribution rate, now 18.6 percent, is forecast to hit 19.9 percent by 2028. The German Economic Institute (IW) warns that without fundamental changes, contributions could climb to 22–23 percent during the 2030s. The commission’s target is to stabilise the pension level – the ratio of a standard pension to average earnings – between 48 and 50 percent long-term, though critics doubt the figure is sustainable as the number of contributors shrinks.
Health data from the DAK insurance report for 2026 underlines why many older workers seek an early exit. Employees aged 50 and above are ill less frequently than younger colleagues, but when they fall sick, their absences average 26.9 days – twice as long. Among 66-year-olds, the sick-leave rate already stands at 11 percent.
