Pensions have long been a contentious topic in Germany, and this week Chancellor Friedrich Merz rekindled the debate. Speaking at an event hosted by the Association of German Banks in Berlin, Merz warned that statutory pension insurance “alone will, at best, still provide only basic coverage for old age” and “will no longer be sufficient to secure one’s standard of living in the long term.” He argued that workplace and private funded retirement savings must play a much larger role than at present, which would mean greater emphasis on stocks and other investments — a controversial proposal given market volatility.
Labor Minister Bärbel Bas of the Social Democratic Party (SPD), the junior coalition partner to Merz’s Christian Democratic Union (CDU), sharply criticized his comments. Bas said Merz had given the impression that people should secure themselves privately, and many interpreted his remarks as implying they might “no longer even receive a decent pension.” Tensions between the CDU and SPD over pension policy may intensify: a coalition-appointed pension commission is due to present recommendations by the end of June.
Demographic trends and rising life expectancy are central to any plan to secure future pensions. Low birth rates mean fewer workers paying into the state system while the number of retirees grows. The OECD’s “Pensions at a Glance” study finds wide variation in pension systems across its 38 member countries, making direct comparisons difficult.
Measured as net pension relative to pre-retirement income (after taxes and social contributions), Germany’s replacement rate is about 53%, below the OECD average of 61%. Large European countries such as France and Italy reach roughly 70–80%, while Estonia, Lithuania and Ireland can be below 40%. At the high end, the Netherlands, Portugal and Turkey report replacement rates above 90%.
The actual retirement age matters for pension financing. In Germany the average exit age from the workforce is just over 64 — nearly three years earlier than the statutory retirement age for those born in 1964 or later. Some countries already require work until 67, including the United States and Japan. The OECD generally recommends linking retirement age to rising life expectancy.
Contribution levels also differ widely: France’s contribution rate is around 30%, Italy’s about 33%, while Germany’s is 18.6%, split equally between employers and employees. Poverty in old age is a growing concern, especially for low earners who could not save much privately. Denmark, for example, uses a tax-funded basic pension to address this risk.
A uniquely German issue is the east–west disparity. Those who worked in the former GDR have long received lower pensions relative to years worked; the slow alignment with western levels was not completed until 2025, 35 years after reunification. That history — and the lack of opportunities to invest in private pension vehicles under communism — means poverty in old age affects East Germans more frequently.
This article was originally written in German.