Speaking Friday morning after late-night talks with his junior coalition partners the centre-left Social Democrats (SPD), Merz said it was the SPD's "wish that we not amend this bill".
"We agreed on this yesterday," he added.
The reform is a key element of the coalition agreement between the two parties and had been approved by cabinet in August.
In recent weeks however, 18 lawmakers from the CDU's Junge Union youth wing had threatened to block the plan at a parliamentary vote expected next week.
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Their votes are crucial as the government only has a majority of 12.
Merz said the Junge Union's concerns would be taken into account in a broader review of the pensions system due in 2026, which will also tackle the issue of raising the retirement age.
"I think there will be broad agreement within the parliamentary group on this approach and these proposals," Merz said.
The government's current pension proposals aim to keep pensions at 48 percent of average income until 2031, thereby meeting a key SPD demand.
The Union rebels have voiced particular concern at the idea that this target could extend beyond 2031.
They say this would penalise younger Germans who would have to foot the bill for pensions as the population ages.
Some prominent economists have backed the rebels, arguing that the measure was indiscriminate and would see pensions flow to wealthy retirees who might not need the money.
The government also plans a provision for a so-called "active retirement" enabling pensioners to earn up to €2,000 tax-free per month if they wish to continue working.
READ ALSO: What Germany's incoming 'active pension' means for older workers
The reform also includes an extension of "mothers' pensions": payments to women who spent time out of the workforce to raise children. That has been a demand of the CDU's Bavarian sister party, the CSU.
The coalition also plans to use 10 billion euros of dividends from the state's share portfolio in companies such as Deutsche Telekom and Commerzbank to bolster private pension schemes.
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