Germany announces biggest pension hike in decades

The German government confirmed on Wednesday that it was hiking the state pension by up to 6 percent, but trade unions warned that the increase would immediately be eaten up by inflation.

Germany announces biggest pension hike in decades
A woman takes money from her purse. Photo: picture alliance/dpa/CLARK

German pensioners are about to receive the highest increase to their payments in years.

Pensioners in west Germany are to receive the largest single hike in their payments since 1983, with the government announcing a 5.35 percent increase that will come into effect on July 1st.

In east Germany, where the pension is calculated differently to compensate for lower wages, pensioners will get an even bigger higher hike of 6.12 percent, the biggest such increase in the former East since 1994.

“The statutory pension is working very well despite the challenges we are facing right now,” Labour Minister Hubertus Heil said on Wednesday.

As a result of the increase, a monthly pension of €1,000 based only on west German contributions will rise by €53 on July 1st, while a pension of the same amount in the east will rise by around €61. 

READ ALSO: Could people in Germany soon be working until the age of 68?

But social welfare associations and unions said that Germany’s 21 million pensioners are unlikely to benefit from the increase due to the current high level of inflation. 

“The comparatively good pension increase this year will be eaten up completely by rising prices,” said Anja Piel from the German Federation of Trade Unions (DGB).

“Pensioners are massively affected by inflation-related cost increases,” agreed Ulrich Schneider, head of the Paritätischer Gesamtverband. He added that the fact that there had been no rise in pensions in 2021 made the increase seem more impressive than it actually is.

Pensions are adjusted every year on July 1st, depending on wage trends. If wages fall, a legal guarantee prevents the retirement benefit from also falling.

Last year there were no pension increases due to the fact that wages flatlined. 

READ ALSO: Pensions in the EU: What you need to know if you’re moving country

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When are people in Germany retiring?

The retirement age in Germany has been rising for years. But last year, people retired a little earlier - and they received slightly higher pensions than those who became pensioners the previous year, according to a report.

When are people in Germany retiring?

Politicians and economists have been arguing that people in Germany will have to retire later in life due to the ageing society. But a new report showed German residents actually entered their retirement phase of life slightly earlier last year than the previous year. 

According to figures from the German Pension Insurance Fund, a total of 1.435 million employees retired in Germany in 2021.

On average, men retired at the age of 64.05, while in 2020 the retirement age for them was 64.07. Women retired at 64.18 – compared to 64.24 the previous year.

Despite the recent slight decline, there has been a different trend for a long time, reported German magazine Spiegel. The average time that people have been subject to pension insurance has increased by four years since the beginning of the noughties. In 2000, for instance, only 10 percent of 60-64 year-olds were subject to pension insurance, whereas recently it has climbed to more than 40 percent.

The fact that this is now changing, at least slightly, could have something to do with the increasing salaries of new pensioners. When it comes to old-age pensions, men received an average of €1,204 in 2021, compared to €1,171 net the previous year. Women got €856 in 2021 compared to €827 the year before. 

READ MORE: How does Germany’s pension system measure up worldwide?

For reduced earning-capacity pensions, men received an average of €956 (compared to €914 in 2020) net per month, and women received €882 (€851 in 2020).

The highest average pensions were received by people who retired with the deduction-free pension after 45 years of insurance (known as ‘Rente mit 63‘ or pension at 63 in Germany). For men, the average pension payment in this case after deduction of health and long-term care insurance contributions was €1,579 per month, and for women it was €1,235.

Figures show that older people in Germany – especially the highly qualified – are increasingly working to the retirement age – and even beyond. However, many baby boomers would rather get out sooner than later. Furthermore, the retirement age can’t be postponed in some cases such as physically demanding jobs.

When calculating state pensions in Germany, the number of years worked, your age, and average income determine what people receive. 

What is the current retirement age in Germany?

The age of retirement in Germany has been slowly increasing since the year 2012, when a government reform raised it from 65 to an eventual age of 67.

Currently, the age of retirement is being raised by a month each year. People who were born in the year 1956 and celebrated their 65th birthday last year will likely have to wait until they are 10 months past their 65th birthday before they can celebrate their retirement.

Starting in the year 2024, the age of retirement will be raised by two months every year until it hits a ceiling of 67. That means that people born in the year 1964 will have to wait until their 67th birthday before they can start to enjoy their next phase of life after working. 

Germany’s ruling coalition – made up of the Social Democrats (SPD), Greens and Free Democrats (FDP) – have not agreed on pushing up the retirement age, although they are examining the issue of how to keep the pensions system afloat.

READ ALSO: Pensions: How the new government plans to solve an old-age issue

Some experts in Germany say the retirement age will definitely have to be raised further because people are living longer and there won’t be enough workers paying for pensioners in future. 

The head of the German pension insurance, Gundula Roßbach, warned months ago that politicians would have to “keep a close eye” on the development.

READ ALSO: Could people in Germany soon be working until they are 68?


Pensioners – (die) Rentner

Pensions/old-age pensions – (die) Altersrenten

Reduced in earning capacity pensions – (die) Erwerbsminderungsrenten

Pension insurance – (die) Rentenversicherung

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