The Bundestag has passed the 2025 pension package – specifically the “Bill to stabilise pension levels and fully equalise child-raising periods”. It contains three elements: the extension of the “stop line” for pension levels, the completion of the mothers’ pension and the abolition of the connection ban, a labour market law-based foundation for active pensions. The Federal Cabinet approved the package on 6 August.

What exactly is the 2025 pension package about?

The pension level is set to be stabilised at 48 per cent by 2031. The mothers’ pension III, as it is known, is intended to close an equity gap. For children born before 1992, three years of child-raising time would also be credited – as is already the case for children born later. 

The draft also contains a labour law regulation: the so-called connection ban will be lifted, making it easier for people who have reached the standard retirement age and want to voluntarily continue working to return to their previous employer. 

Why is it so important to stabilise the pension level?

For most people in Germany, the statutory pension is the primary source of income in old age. It is therefore important to keep the pension level stable and ensure that statutory pension insurance remains reliable. 

Prior to the pension adjustment in July 2025, the pension level was held at 48 per cent. This “stop line” is now set to be extended until 2031. If it were not extended, it would expire. The result: the pension level would fall significantly, which in turn would lead to lower retirement income. 

The law also requires the Federal Government to prepare a report in 2029. The report is intended to show how the confidence of contributors and pensioners in the stability and efficiency of the statutory pension insurance system can be further strengthened after 2031.

The pension level indicates how much pension someone who has always worked at the average wage for 45 years will receive – in relation to the current average wage. The pension level therefore shows how pensions develop in relation to wages. If it falls, pensioners will be decoupled from wage growth. Pensions are rising more slowly than wages, and pensioners are becoming poorer in relation to the working population.

How will the mothers’ pension be improved?

With the mothers’ pension, child-raising periods are taken into account when calculating pensions. Until now, the recognition of child-rearing service in pensions has differed depending on when the children were born: up to three years of child-rearing time can be recognised for each child born after 1992. For each child born before 1992, only up to two-and-a-half years can be recognised.

This difference was originally even greater: for children born before 1992, only one year could be recognised up until 2014. In 2014, the mothers’ pension I created the possibility of recognising up to two years of child-rearing periods. The mothers’ pension II framework extended this period to up to two-and-a-half years in 2019.

With the mothers’ pension III framework, child-raising periods for children born before 1992 are now to be extended to up to three years. This move will achieve full equality under pension law for all mothers and fathers. The law is due to come into force in 2027. If it is only technically possible at a later date, the pensions are to be paid out retroactively.

What is the background of the mothers’ pension?

The statutory pension is structured as an intergenerational contract and is financed by a pay-as-you-go system: the contributions paid into the pension insurance scheme by employees currently subject to social security contributions are used to pay out to current pensioners. Consequently, the statutory pension cannot be maintained without the next generation.

The mothers’ pension is intended to compensate for disadvantages resulting from the fact that bringing up children often leaves gaps in the pension history of a parent. Anyone who has raised children and thus rendered an important service to society will have this fully recognised in future with the mothers’ pension III – regardless of the child’s year of birth.

What is meant by the elimination of the connection ban?

The 2025 pension package also contains a new regulation on the continued employment of pensioners. This move is also intended to contribute to securing skilled labour.

The Federal Government wants to create incentives for older people to voluntarily continue working beyond retirement age. This should be less complicated in future. To this end, the Federal Government wants to abolish the prohibition of subsequent employment for these people, which is regulated in the Part-Time and Fixed-Term Employment Act. That act specifies that if an employee has already been employed by the same employer, he or she may not be re-employed for a fixed term without there being an objective reason for doing so. This regulation serves to protect the employee. However, older employees who have reached the standard retirement age will now also be able to continue working for the same employer for a limited period of time – in addition to permanent employment relationships or employment relationships that are limited in time for material reasons. This shift makes it easier for them to return to their previous employer.

What are the next steps?

The Bundesrat still has to approve the 2025 pension package. It can then take effect on 1 January 2026. The pension package is part of the first overall package of pension reforms. Other components are the Second Company Pension Strengthening Act and the active pension, which were also passed by the Bundestag today.