Germany’s Pension Overhaul Draws Fire: Institutes Predict 250,000 Job Losses and a Consumption Squeeze
25.06.2026 - 21:16:23 | boerse-global.de
A sweeping reform of Germany’s retirement system, containing 33 recommendations, risks slowing the economy and destroying a quarter of a million jobs before it stabilises public finances, several economic institutes warn. The proposals, handed to the government on 24 June by the pension commission and endorsed in full by Chancellor Friedrich Merz, include a new capital-funded pillar, a later retirement age and a broader base of contributors.
The centrepiece of the package is a mandatory, paritarian contribution to a funded component, to be introduced in 2028. Initially set at 1 percent of gross wages and later rising to 2 percent, the levy is designed to reduce the pension system’s exposure to demographic change. But research institutes IMK and WSI calculate that the combined contribution rate could reach 22 percent by 2032 – compared with 20.4 percent without the capital stock. That extra burden, they argue, would cut economic growth by one percent and trigger the loss of about 250,000 jobs. The employers’ association BDA also attacked the “expensive compulsory capital pension.”
Rating agency Scope, in a study of the reform’s fiscal impact, struck a more optimistic tone. It concluded that the plan would help protect Germany’s top AAA credit rating over the long term by capping the growth of federal subsidies. In 2025 those subsidies stood at €93.2 billion (2.1 percent of GDP). Without adjustments, they would climb to 2.33 percent of GDP by 2035; with the reforms they could be held to roughly 2.2 percent. The analysis cautioned, however, that public debt would rise from 63 percent to about 81 percent of GDP by 2036. The new capital pension, Scope added, would temporarily depress private consumption and overall economic output by roughly 0.15 percent of GDP.
A separate strand of the reform ties the retirement age to life expectancy starting in 2031. For each year that life expectancy increases, the working life would be extended by eight months. According to projections, the retirement age could reach 67.5 by 2041. For a child born today, the age could eventually settle at 70. The so-called “Rente mit 63” – early retirement at 63 for long-term contributors – is to be abolished entirely. The OECD explicitly praised this move, along with planned limits on mini-jobs. Unions reacted furiously: the DGB called the early-retirement option “fair” and demanded it be kept, while the social association SoVD warned that scrapping supplementary earnings possibilities and early-exit routes would push more people into old-age poverty.
To widen the contribution base, the government intends to bring the self-employed, members of parliament and corporate board members into the statutory pension insurance. Mini-job workers – except for school pupils – would also become subject to social insurance. Civil servants remain exempt, despite an OECD recommendation to include them.
The political timetable is tight. A coalition committee is scheduled for 1 July to debate further details. The government aims to complete the legislative process by the end of this year. Its official target is to stabilise the net pension level at 50 percent from 2040 onward, and to achieve a total replacement rate of 70 percent through a combination of statutory, occupational and private provision.
