Rising Pension Liabilities Strain Future Budgets
With fewer workers to support an ageing population and, with the number of hours worked per worker declining in recent years, the pressure on Germany’s social-security system is set to increase.
Government efforts to reduce the future pension burden, including the introduction of a EUR 200bn share-based pension fund by 2036, are welcome. Still, further reform is essential as these efforts will likely reduce the expected rise in pension contributions – to around 22.3% of gross salaries by 2045 from 18.6% today — by only 0.4pps of gross salaries.
The government has earmarked EUR 132bn or 27.2% of the total 2025 draft budget for pension spending. Previous studies have indicated that this share could double by 2050 with the old age dependency ratio rising to more than 50%.
This rising financial…
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