In the pension dispute, Chancellor Merz rejected changes to the law regarding the 48 percent pension ownership limit in 2031, but offered fundamental pension reform from 2032.
11/17/2025 | 1:54 min
What is the actual pension rate?
The pension level shows how high the standard pension is compared to the average income. A pension rate of 48 percent means the following: A retiree who has consistently earned average income for 45 years receives 48 percent of average income as a pension.
The average income in Germany before tax is 3,359 euros per month. Therefore, the standard pension is 1,613 euros. Retirement rates have declined in recent decades. 40 years ago the number was around 57 percent.
The current debate over pensions is unproductive. Many plans are not sustainable. “What we really need is additional capital coverage,” said Professor Martin Werding.
November 16, 2025 | 5:13 min
What happens if pension rates fall?
If pension rates fall, this does not mean that pensions will also fall. This is even prohibited by law in Germany, called “pension guarantees”. In this case, a lower pension rate simply means that average earnings increase faster compared to a standard pension. So the pension still increases, just not as much.
Why are pension rates falling and what is the “holding line”?
When calculating the pension, the relationship between the retiree and the contributor is taken into account. This is governed by sustainability factors. In the coming years, the number of pensioners will continue to increase as the number of payers in German society increases. Due to increasing life expectancy, today’s retirees receive much longer pensions than before.
Retirement periods are getting longer and longer
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This would actually ensure that pension levels fall and pension increases are not too sharp. However, a “stop line” has been in place since 2019. The pension rate cannot fall below 48 percent. So the sustainability factor is suspended. In fact, pension contributions for those who pay must be increased. To prevent this, additional costs are paid for with tax revenues.
What is in the current bill?
In the coalition agreement, the EU and the SPD agreed to extend the “stop line” until 2031. This alone results in billions of dollars in additional costs, paid for with tax revenues.
The sustainability factor will apply again from 2032. Pension rates will then fall again. The basis for the calculation is a pension rate of 48 percent. This ensures that the pension rate will be about one percentage point higher after 2031 than without the “cap line”.
Young people in the Union announced their rejection of the planned retirement package. Chancellor Friedrich Merz and his black-red coalition could be in crisis.
November 16, 2025 | 4:31 min
What is the criticism of Junge Union?
Junge Union believes pension calculations from 2032 should have a different starting value. They demanded that the “holding line” of 48 percent not be used as a basis, but 47 percent. This is how high retirement levels would be in 2031 if the cap line didn’t exist. The government under Chancellor Merz rejected this.
According to the Junger Union, a difference of just one percentage point would mean additional spending of around 120 billion euros by 2040, spending that should be financed from the federal budget. According to pension expert Johannes Geyer of the German Institute for Economic Research, this is a serious calculation.
There is resistance to the planned pension package in the European Union, but the SPD demands the approval of the CDU and CSU. Alexander Schweitzer (SPD) opposed renegotiation.
November 16, 2025 | 5:07 min
How will SPD react?
The SPD does not want to negotiate in these discussions. “The Bärbel Bas draft law is in line with the agreement in the coalition agreement and must now be decided as such,” said a letter made available to ZDFheute. The party now expects “contractual loyalty” from the Union.
What will pension reform look like?
Friedrich Merz has said several times in recent days that the pension system as a whole should be reformed before the next federal election to ease the burden on the younger generation in particular.
“It could be that this coalition is currently experiencing a crisis,” said ZDF correspondent Feldhoff regarding the dispute over the pension package between Chancellor Merz and Junge Union.
November 15, 2025 | 1:06 min
Expert Geyer believes that such reforms are important to reduce incentives for early retirement, so that company pensions become mandatory and self-employed people also pay statutory pension insurance.
Geyer also said: “The labor market is critical to financing retirement.” If more women, older people or migrants work, the burden could be borne by several parties.
