A new report presented to the German government has stated that the pension insurance reserve is well-funded until the end of the year, with the contribution rate set to remain stable through 2027.

Deutsche Rentenversicherung Federal Board of Directors chair, Anja Piel, said that there will be a slight deficit in pension insurance in 2025. He explained that this means the sustainability reserve will therefore decrease from 1.57 monthly expenditures at the end of 2024 to an expected 1.3 monthly expenditures by the end of the year and will be further reduced in 2026.

The funds released will be used as planned to stabilise the contribution rate, which is 18.6 per cent this year and next. A slight increase in the contribution rate of 0.2 percentage points is expected for 2027.

Also included within the report is that the current pension level is expected to remain at around 48 per cent until 2028, with further legislation extending this to 2031.

Piel said: "This means, regardless of the development of the number of contributors, that pensions will continue to be adjusted in line with wage developments."

Current forecasts show that, according to the current legal situation, the contribution rate in 2040 would be 21.4 per cent and the pension level would be 45 per cent.

In the early 2000s, the federal government had agreed in a broad social consensus to maintain pension insurance as a central component of the social security system in Germany.

Therefore, clear requirements have been set: If the contribution rate exceeds the 22 per cent mark by 2030 or the pre-tax protection level falls below 43 per cent, appropriate measures would have to be taken. According to current forecasts, however, this is not the case.

Despite the rosy nature of the government’s proclamations, this comes on the back of a new report from the bankenverband in Germany that calls for urgent action from politicians due to the dependence of many on the state pension.

That report found that while 73 per cent of respondents thought that their current financial situation was a positive one, more than four-in-ten women (42 per cent) and nearly the same proportion of men (37 per cent) thought they would have ‘significant restrictions’ in old age.

ING Germany CEO, Lars Stoy, who is responsible for retirement provision on the board of the bankenverband, said: "Private pension provision should be reformed urgently, because the existing pension system is reaching its limits. It is important that politicians take action now.”

He added: “The idea of the early start pension is an important step in the right direction. But even after the age of majority, there should be incentives to save for securities. The seamless transition from an early start pension to a lifelong retirement savings account would be ideal. The current working population would also benefit from this."

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