As usual, pensions in Germany are set to go up next summer, according to a new report seen by Bild am Sonntag. As Germany struggles to retain the sustainability of its pension system, contribution rates are set to remain stable for next four years, but hikes are on the horizon.

Pension benefits in Germany to rise by 3,5 to 4,5 percent in 2023

Pensions in Germany are adjusted every year in line with wage development. Although the increase in 2023 isn’t enough to offset the rising cost of living in Germany - and is lower than the 5-percent increase they received this year - the news that pensions will rise by a decent amount in 2023 will be welcomed by the 21 million retirees in the federal republic. 

According to a draft of the 2022 pension insurance report, seen by Bild am Sonntag, statutory retirement pensions will increase in July 2023, by around 3,5 percent in the western (old) federal states and by 4,5 percent in the eastern states. For a pension of around 1.000 euros this equates to an increase of 35 euros per month in the west and 42 euros in the east. 

“According to the data now available, pensioners can again expect a noticeable increase in their pensions in the summer,” Federal Labour Minister Hubertus Heil told Bild am Sonntag. According to the report, pensions are expected to increase by a total of nearly 43 percent by 2036 - around 2,6 percent per year. 

Pension contribution rates to rise to 21,3 percent by 2036

The report also contained forecasts about contribution rates to Germany’s social security system, which is facing a funding shortfall as millions of so-called “baby boomers” approach retirement age. This will put a financial strain on the country’s pay-as-you-go pension system, under which those currently working pay for the pensions of the previous generation. 

According to the report, the contribution rate will remain stable at 18,6 percent until 2026, before rising to 19,3 percent in 2027 and to 20,2 percent by 2030. By 2036, contributions will have risen to 21,3 percent of each person’s salary up to the contribution threshold. 

Heil told Bild am Sonntag that these predictions were better than what could have been expected: “Contrary to many forecasts, we have managed to keep the contribution rate stable for longer than expected.” He added that, amid the current cost of living crisis, it was “good news that working people can rely on the contribution rate not increasing.”