German pension reserve nears legal floor as contributions forecast to rise to 19.7% in 2028

Reserve heads toward its legal minimum

At the annual press seminar of Deutsche Rentenversicherung in Würzburg, Anja Piel, a DGB board member who chairs the federal board of the pension insurer, presented the latest outlook for the statutory pension fund. Its reserve is expected to end 2027 only just above the legal floor of 0.3 monthly expenditures. For 2026 the pension insurer forecasts a result of minus 10.8 billion euros, which would leave a reserve of 31.2 billion euros, roughly one month of spending. In 2027 the reserve drops to 0.37 monthly expenditures and declines only slightly further in the years after, which would leave it effectively used up.

Contribution rate set to jump in 2028

The contribution rate has stood at 18.6% of gross wages for many years and stays at that level in 2027. That stability depends on drawing down the reserve, which is being used to delay an increase for as long as possible. For 2028 the forecast is 19.7%, which Piel described as the first increase in more than two decades. The current estimate puts the rate at 21.0% by 2038, while another estimate places the 21% level around 2040. Both sets of projections reflect current law and leave out the coalition's planned reform, including two extra contribution points intended to fund a capital-funded component.

2027

18.6 %

2028

19.7 %

2038

21 %

Data from the article text

Pensions keep rising as employment stagnates

Pensions rose 4.2% last summer, more than expected, and official forecasts see a further increase of 4.1% in July 2027, which Gundula Roßbach, president of the pension insurer, confirmed as a statistical adjustment tied to wage growth. The German economy grew slightly more than expected in the third quarter, but Piel said the recovery will take time to reduce unemployment, and employment, which is central to pension income, is stagnating. She said the situation is neither an all-clear nor an alarm.

“We are not in a crisis-like state with the statutory pension insurance.”

Spending is rising as well, and more baby boomers retire every month. Alexander Gunkel, co-chair of the pension insurance board and speaking for the employer side, forecast a six-figure number of missing contribution payers in the coming years, a problem he expects to intensify with economic development and aging.

Reform talks and the federal budget

The government's pension commission presented recommendations at the end of June, a package of 33 proposals that Chancellor Friedrich Merz and then labour minister Bärbel Bas initially wanted implemented in full. The coalition has since argued over individual elements, including whether to abolish early retirement without pension deductions. Johannes Winkel, a CDU member of parliament and head of the Junge Union, said at a Süddeutsche Zeitung event:

“If no reform succeeds now, one can honestly say that the federal government's reform efforts have failed.”

The new federal labour minister, Alexander Schweitzer (SPD), intends to present a draft law soon, and the government wants legislation to begin before Christmas. Gunkel said the reform's impact cannot yet be quantified, but that without further intervention the benefit level would fall from 2032 as more baby boomers retire. Gunkel also addressed the choice among the proposed measures.

“How these weights are finally distributed is not a question of actuarial mathematics. It is a political question.”

The 2027 draft budget gives the labour ministry its largest spending share, above 200 billion euros for the first time, with pension insurance benefits rising 4.6% to about 132 billion euros.