The German Bundestag has passed the Second Occupational Pension Strengthening Act (BRSG II), although it stressed that this is "only the beginning", with further proposals for pension reform to be shared as early as next year.

The reforms mean that the average pension in Germany, which would have been decoupled from wage growth from 2026 onwards, will remain at 48 per cent of the average wage until 2031.

Without the latest changes, the value of the average pension relative to wages had been set to fall more quickly, with estimates suggesting it could have fallen to 44.9 per cent of the average wage by 2040.

In addition to this, the expansion of the "mothers' pension" from 1 January 2027 is intended to give equal recognition to the childcare contributions of mothers or fathers during the first three years of each child's life, regardless of the year of birth. 

The pension package is also closely linked to other pension policy measures being introduced by the federal government, including the early retirement pension, the active pension and the strengthening of company pensions.

The reforms were highlighted by the Chancellor, Friedrich Merz, as "a promise to all generations in our country, to the young as well as the old,". 

However, he emphasised that "this is not the end of our pension policy, but only the beginning", arguing that a first step “in the right direction” has been taken.

Indeed, Merz confirmed that further reforms will also be following very shortly, with a commission to share further comprehensive pension reform recommendations by mid-2026.

"The coalition has decided that it will propose a comprehensive pension reform as early as next year. First, a pension expert commission will submit proposals," he confirmed.

"Then, we in the federal government will address these proposals promptly and subsequently introduce the pension reform into parliament.

"This is what we agreed upon in the coalition agreement; this is what we reiterated last week in the coalition committee. This second pension reform will then become a central component of our social security system."

Merz acknowledged that this "will not be an easy task", but stressed that he is "very confident that we will succeed".

"The work is now before us, and the first step in the right direction has been taken today," he stated.

The news was welcomed by the German Association for Occupational Pensions (aba) chair, Beate Petry, who said that the package introduces "many sensible measures to strengthen occupational pension schemes, which is essential from a social policy perspective". 

"Even though we would have preferred a somewhat more ambitious reform, we are happy about the adoption of the BRSG II in the German Bundestag. More and higher occupational pensions are in the interest of intergenerational fairness," Petry stated. 

In particular, the aba welcomed the improvements to subsidies for low-income earners, the new possibilities for company-level option models, the more flexible funding requirements for pension funds, and the slightly improved affiliation options for social partner schemes.

However, the aba said that whilst the introduction of concrete targets and clear consequences for the evaluation of the social partner model in 2027 underscores the government's expectations, a more ambitious target of tripling or even quadrupling the current number of participants in social partner models would have been desirable.

“We need more courage to reform the three-pillar system of the German pension system," Petry stated, suggesting that the newly announced pension commission should quickly propose major reform steps and, in particular, define clear roles for all pillars of retirement provision.

"As is common practice abroad, occupational pensions should be given greater importance," Petry said. "We need a sound, intergenerationally fair retirement system with a dual core of statutory and occupational pensions."

The United Services Union (Verdi), also welcomed plans to examine the further development of the basic pension into a poverty-proof minimum pension for long-term insured persons and to broaden the revenue side of the statutory pension insurance by including further types of income and groups.

However, it warned that other areas will require "critical evaluation", arguing that "the planned pension commission must not become a gateway for deteriorating the statutory pension system".

"In particular, extending working life by raising the retirement age and linking pension adjustments to parameters other than wage growth, such as the inflation rate, would be detrimental to both future and current pensioners," Verdi chairman, Frank Werneke, stated.

"Any further increases would amount to a pure pension-cutting program, especially for people who are unable to work for health reasons. Linking pension adjustments to inflation would also reduce the purchasing power of pensions, leading to increased poverty among the elderly."

The union also raised broader concerns, warning that the composition of the pension commission is also worryingly biased.

"All the commission members sitting at the table do not themselves pay into the statutory pension scheme and yet they make decisions for ordinary contributors. That doesn't bode well," Werneke stated.

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