Germany’s incoming government has promised to secure and make sustainable the state pension through increases in tax revenue.

That is the message put forward by Friedrich Merz, widely assumed to be the nation’s next Chancellor, as his CDU party lines up to move into coalition with the SDP.

The pension level, said the coalition in its Koalitionsvertrag 2025, will be secured at 48 per cent by 2031. The expense for this, Merz and his ilk said, will be compensated through tax funds.

The coalition wrote: “We compensate for the additional expenses that result from this with tax funds. We basically stick to the sustainability factor. Only a growth-oriented economic policy, a high employment rate, and adequate wage development make it possible to finance this permanently.”

The Merz-led coalition also returned to the idea of giving every child in Germany €10 a month, which will be invested in a third pillar pension scheme. The amounts from this will be exempt from taxation, with these payments being made until the child turns 18. Merz’s government also said that it will strengthen second-pillar pensions, especially in small- and medium-sized businesses.

There will also be added incentives for those choosing to remain in work after the retirement age, with the new government saying that it wishes to add ‘more flexibility’ in the transition from working to retiring.

It said: “If you reach the statutory retirement age and continue to work voluntarily, you will receive your salary of up to €2,000 a month.

The self-employed are also to come under scrutiny, with the coalition looking to incorporate all new self-employed people into the obligatory security system.

Overall, there is a continued reliance on taxpayer revenues to fund Merz’s vision. There was no mention, or even hint, for reducing pension provision or increasing the retirement age. Likewise, there was no hint given as to increasing the taxable allowance for private pensions or reducing the burdens on private firms to provide access to pensions schemes.

Instead, Merz’s people said: “Financing takes place from tax funds because it depicts an entire social service.”

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