Significant increase in pensions

Adjustment applicable as of 1 July Significant increase in pensions

Pensioners will receive more money as of 1 July: payments will increase by 5.35 percent in western Germany and by 6.12 percent in the new federal states. This was announced by the Federal Ministry for Labour and Social Affairs. The development showed that the pension system was working in spite of the current crises, said the Federal Minister for Labour and Social Affairs, Hubertus Heil.

Pensioners sitting on a park bench.

According to the Federal Minister for Labour and Social Affairs, Heil, it is “important to see that our pension system works", particularly in view of current challenges.

Photo: Getty Images/iStockphoto

According to data provided by the Federal Statistical Office and the German pension authority (Deutsche Rentenversicherung Bund), this increase will raise the pension value in western Germany from 34.19 to 36.02 euros and in the eastern states from 33.47 to 35.52 euros.

"This is good news for those people whose labour has been keeping things running for years," Heil said.

"Catch-up factor" already costed in

The adjustment takes account of the reinstatement of the so-called catch-up factor, thereby implementing one of the important provisions of the coalition agreement: reinstating the catch-up factor will ensure that the pension reduction that was not applied in the previous year is offset against the pension increase, so that the pension adjustment follows actual wage developments. 

The catch-up factor is one component of the so-called safeguard clause included in the pension adjustment formula, and works in conjunction with the state pension guarantee, under which pension cuts are prohibited by law. It ensures that prior to the annual pension adjustment, consideration is first given to whether pension cuts that were actually necessary in the past but not implemented are to be included retrospectively, as, in principle, pensions track wages. The decision was taken in 2018 to suspend the catch-up factor up to and including 2025, but the new Federal Government committed itself to reactivating the catch-up factor. 

Pension insurance in good shape following the crisis

According to Heil, it is important to see that "our pension system works", particularly in view of the current challenges such as rising prices and the international crisis situation. Pension rates, he went on to say, should not be decoupled from wage trends.

The Federal Government will shortly be introducing a bill to this effect, which will also make provision for improvements for the recipients of occupational pensions.