Pensions in Germany will rise by 4.57 percent on July 1. On Friday, the Federal Council approved a corresponding regulation from the Federal Ministry of Labor. For the first time, the increase will be the same for the more than 21 million pensioners in East and West. A pension of 1,000 euros will therefore rise by 45.70 euros.
Last autumn, official estimates were still predicting an increase of only around 3.5 percent. The main reasons for the stronger increase are the stable labor market in Germany and good wage agreements. Wage increases of 4.72 percent were crucial for the pension adjustment.
For the first time in years, inflation is not eating up the increase. The inflation rate in Germany in May was 2.4 percent above the level of the same month last year. In the past two years, pension increases have lagged behind inflation; the year before that, there was no increase in the West and only a minimal increase in the East.
In 2023, pensions in the old states had risen by 4.39 percent and in the east by 5.86 percent. However, pensions had already been equalized last year. This was earlier than planned, because wages had previously risen significantly more in the east than in the west.
According to the latest pension insurance report, pensions will increase to a lesser extent in the future. The report assumes an average increase rate of 2.6 percent per year up to 2037 – a total of a good 43 percent. Without legal intervention, the transition of millions of so-called baby boomers into retirement would become increasingly noticeable. According to the report, without reform, the pension level is likely to fall from the current 48.2 percent to 45.0 percent in 2037. Pensions would then generally no longer rise as much as wages.
The coalition is responding with a pension package that will fix the pension security level at 48 percent in the future. The government also wants to invest at least 200 billion euros of federal funds in the capital market by the mid-2030s. The proceeds will be used to cushion increases in contributions. The plans are to be discussed in the Bundestag from the end of June and approved by the Bundesrat and Bundestag by October, according to sources in the traffic light coalition.
The Federal Cabinet decided on the adjustment in April. The regulation will be published in the Federal Law Gazette after approval by the Federal Council and will come into force on July 1, 2024.
