Pensions in Germany are due to rise significantly this year - and more than originally expected - the Federal Ministry of Labour has announced. 

Larger-than-expected pension adjustment in Germany

Around 21 million pensioners in Germany are set to benefit from a larger-than-usual pension adjustment on July 1, 2022. Every year, the government adjusts pension benefits in line with the development of salaries in Germany. 

From the middle of this year, pensions are set to rise by 5,35 percent in the western federal states and by 6,12 percent in the eastern states - a significantly higher adjustment than was originally announced by Labour Minister Hubertus Heil at the end of November 2021, when the increase was put at around 4,4 percent. 

Increase takes into account negative wage development from last year

At the same time, the increase is lower than what it might have been, since this calculation has taken into account the so-called “catch up factor”, a policy recently reinstated by the coalition government. In a nutshell, this policy prevents pensions from increasing too much if wages have negatively developed the year before. 

The government’s pension guarantee stipulates that pensions in Germany cannot go down, even if wages fall in any given year. In 2021, despite average wages decreasing due to the coronavirus pandemic, there was no pension cut. With incomes now rising once again, pensions will also increase. However, this year’s pension increase has been depreciated to reflect the fact that wages stagnated last year.  

Announcing the increase, Heil said, “I am pleased that we can announce a significant pension adjustment… Especially in view of the current challenges - be it rising prices or the international crisis - it is important to see that our pension system is working.”