German pension commission proposes linking retirement age to life expectancy and abolishing ‘pension at 63’
A government-appointed expert panel recommends a gradual increase in Germany’s retirement age towards 70 by the 2090s, the introduction of a state-managed capital-funded pillar, and an end to the early retirement option at 63.
What the commission proposes
A ten-member expert commission, chaired by Professor Constanze Janda and former Federal Employment Agency chief Frank-Jürgen Weise, has submitted roughly 30 recommendations for Germany’s statutory pension system. The proposals, leaked to multiple German media outlets over the weekend, would link the retirement age to life expectancy from 2032 onward. This mechanism is expected to push the standard entry age from the current target of 67 (due in the early 2030s) to 70 by the 2090s. The commission also calls for abolishing the ‘pension at 63’ – the option to retire without deductions after 45 contribution years.
Even today, many people cannot manage to work until 67. Now the pension commission wants to extend working life even further.
A new funded pillar
A core element is a capital-funded supplementary pension within the statutory system, modelled on the Swedish premium pension. It would be financed by an additional contribution from gross wages, initially set at 0.5 percent and gradually rising to 2 percent, split equally between employees and employers. A state-managed fund would invest the contributions, with individual accounts paying out from 2040 onward. Until the funded pillar matures, a tax-financed transitional factor would temporarily support the pension level.
Financing and the sustainability factor
The commission proposes reinstating the ‘sustainability factor’ from 2032, which adjusts annual pension increases to the ratio of contributors to retirees. The factor would also be tightened. The statutory contribution rate of 18.6 percent is already projected to jump to 19.9 percent in 2028, and the extra capital-pillar contribution would come on top. Under the combined pay-as-you-go and funded system, the target replacement rate is 48 percent in the medium term, rising to 50 percent once the capital pillar fully matures after 2040.
- Commission hands over report to Chancellor Merz and Labour Minister Bas
- Statutory contribution rate jumps from 18.6% to 19.9%
- Retirement age begins to rise with life expectancy; sustainability factor reactivated
- Capital-funded pillar starts paying out to new retirees
Expanding the contributor base
To broaden the financing base, the commission recommends ending most contribution-free ‘mini-jobs’, bringing new self-employed workers and lawmakers into the statutory pension, and limiting the use of civil-service posts to core sovereign functions. Integrating existing civil servants was rejected because it would impose heavy costs on state budgets without any financial gain for other insured persons.
Political reaction and next steps
The commission reached its decisions largely by consensus, typically with more than 70 percent support. The report will be formally handed to Chancellor Friedrich Merz and Labour Minister Bärbel Bas on Tuesday, a week earlier than originally planned. The left-wing Die Linke party immediately condemned the proposals. Its pension policy spokesperson, Sarah Vollath, described them as “massive pension cuts” that would “hit people with low incomes particularly hard” and called the capital-funded approach a “big mistake”. The coalition government has signalled that the recommendations will feed into a broader reform package covering income tax, the labour market and bureaucracy, to be drafted before the summer recess.
