A commission appointed by the German government has proposed establishing a new state-run, capital-funded pension pillar and reforms to the way the retirement age is set, according to reports.

Media reports in Germany stated that the ‘Pension Commission’ has outlined 33 proposals to reform Germany’s pension system and will present them to German Chancellor, Friedrich Merz, on 23 June.

Under the proposals, the pension age will be increased incrementally, linked to life expectancy from 2032, rising to 68 by 2051 and to 70 by 2092 according to its current estimations.

Currently, Germany law has outlined that the pension age is set to reach 67 by the early 2030s.

The proposals reportedly also include the abolition of the option for statutory early retirement after 45 years of contributions without deductions.

Furthermore, the commission set out plans for a new state-run pension fund, modelled on the Swedish premium pension.

The mandatory, capital-funded pension pillar will fall within the statutory system, and would be financed by employer and employee contributions.

Under the proposals, a portion of contributions will be invested in capital markets through the fund, rising from 0.5 per cent to 2 per cent of gross wages in phases.

Its aim would be to stabilise pension levels and increase them from 2040, as the country seeks to address an ageing population and strained public finances.

"Despite some good proposals, the core of the plans put forward by the Federal Government's Pension Commission misses the mark when it comes to the realities of working people's lives,” commented Ver.di chair, Frank Werneke.

“A number of the more than 30 proposals put forward by the Pension Commission are to be welcomed.

“Unfortunately, the central proposals of the pension commission are heading in the wrong direction.

“Pension levels are set to decline significantly from 2031 onwards – even though current pension levels are already insufficient for many people to live with dignity.

“The commission's proposal to compensate for the falling pension level by establishing a capital-funded pillar within the statutory pension insurance system is ineffective for the generation retiring in the 2030s.

“Those affected are expected to save 1 per cent of their income without any chance of using the resulting future capital gains to offset the declining pension level. The details of the ‘safeguard clause’ suggested by the commission in this context remain completely unclear.”

Werneke argued that the proposal to gradually increase the retirement age should be “clearly rejected” as it “ignores the realities of working people’s lives”.

“In many professions, the physical and mental demands are so high that even a retirement age of 67 is unattainable for many,” he added.

“The fact that the commission is also proposing to abolish the full pension after 45 years of contributions is a complete disregard for the lifetime achievements of the people affected.”

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