German government agrees biggest pension increases in decades

Berlin (dpa) – The German Cabinet on Wednesday approved the biggest increase to pensions in decades.

In the former West Germany, pensions will rise by 5.35% on July 1, and in the former states of East Germany by 6.12%.

For eastern German states, this is the biggest increase since 1994, while in the west it is the biggest rise since 1983.

Civil society groups and trade unions were unimpressed, however, by the centre-left coalition’s plans, and pointed to the historically high inflation rate in Germany.

“This year’s comparatively good pension increase is being completely eaten up by rising prices,” said Anja Piel, a board member of the German Federation of Trade Unions.

Economic experts earlier on Wednesday predicted an inflation rate of 6.1% this year.

The draft bill from Social Affairs Minister Hubertus Heil also provides for an increase in the pensions for those with reduced earning capacity – for example if they have had to retire or partially retire on health grounds.

About 3 million people on this kind of pension are to receive more money in the long term. From July 2024, they could receive supplements of up to 7.5%.

Heil also plans to reinstate the so-called “catch-up factor” in the German pension system.

Pensions in Germany are adjusted every year on July 1 depending on developments in national average wages.

If wages fall, a pension guarantee prevents old-age pensions from falling as well. In the worst case, there are no pension increases, as was the case last year.

The catch-up factor is supposed to balance out these periods of no rises when wages do rise again. It effectively means pension increases are lower.

The previous conservative-led government had suspended the catch-up factor, but now it is being reinstated.