German pension commission proposes raising retirement age and ending 'Rente mit 63'

The commission's blueprint

The commission, set up by the government, concludes its work today and will present its recommendations to Chancellor Friedrich Merz (CDU) and Labour Minister Bärbel Bas (SPD) on Tuesday. The package, leaked over the weekend, includes over 30 proposals. Central among them: a gradual rise in the statutory retirement age linked to life expectancy, the abolition of the "Rente mit 63" (early retirement without deductions after 45 contribution years), and the introduction of a capital-funded pillar within the statutory pension system. The commission also recommends a target net replacement rate of at least 70 percent after tax, with higher rates for low earners.

That is of course a Gesamtkunstwerk, because you have to think across all generations when you make a new system. And that's why it's not so simple.

Political and union pushback

The proposals have drawn sharp criticism from the Left party and trade unions. IG Metall chair Christiane Benner warned that scrapping the deduction-free early pension would meet fierce resistance in metal and electrical industry workplaces. Juso leader Philipp Türmer called the link between retirement age and life expectancy socially unjust, arguing it would penalise those starting a life of hard work. Left party parliamentary leader Sören Pellmann accused the commission of delivering the cuts the Merz government had ordered, and said the capital-funded component would make pensions dependent on rising rents, care costs and arms company share prices.

These proposals ignore the working and living situation of many employees in our plants.

Linking the retirement age to general life expectancy is socially unjust and comes at the expense of those who are just starting a life full of hard work.

Bas signals transition protections

Labour Minister Bas, while praising the overall package, acknowledged the need for safeguards. She said the government would examine which cohorts would be affected and promised trust protection and transition periods. Bas stressed that without reform, contributions would rise sharply as baby boomers retire, leaving current workers with less money in their pockets. She described the capital-funded pillar as a savings model within the first pillar, designed to give younger generations a higher pension level than today.

We have to see now that early retirements are reduced. But there should be trust protection and transition periods.

Expert endorsement

Monika Schnitzer, chair of the German Council of Economic Experts, welcomed the recommendations, noting that many aligned with the council's own 2023 proposals. The commission's emphasis on a net replacement rate and a capital-funded component echoes long-standing calls from economists for a more sustainable pension architecture.

Next steps

The commission hands over its report on Tuesday. The governing coalition will then begin political discussions on which elements to adopt. Bas indicated that the process would involve careful consideration of generational fairness and fiscal sustainability.