Merz Proposes New Mandatory Contribution to Secure Pension System

The stability of social systems in Germany is under threat, prompting Chancellor Friedrich Merz to propose the introduction of a new mandatory contribution for employees. During a recent interview, Merz indicated that the public will need to allocate a larger portion of their disposable income towards retirement, health care, and elderly care in the future.

In light of a significant pension reform, Merz emphasized that any adjustments to the social systems should be perceived as fair by the populace. He stated that citizens must feel included in the reform process. Despite this, he clarified that the upcoming reforms would not necessarily mean an increase in current contributions. When pressed on whether this mandatory contribution could be interpreted as a contribution hike, Merz acknowledged the possibility that individuals might be required to invest more in private retirement savings than they do currently.

Merz advocates for a mandatory contribution towards private capital-funded retirement savings. This approach would empower individuals to build a personal fund that would eventually support their pension.

To further bolster the pension system, the Merz administration has been promoting a 'Early Start Pension' initiative aimed at introducing young individuals to capital markets. Under this plan, starting January 1, 2026, every child aged 6 to 18 would receive a monthly contribution of ten euros from the government, which would be directed into a privately organized capital-funded retirement savings account.

Currently, all employees are required to contribute to the statutory pension insurance system, with a contribution rate of 18.6% shared between employers and employees. However, there is no existing universal mandatory contribution for private retirement savings.

In addressing the controversial suggestion of raising the retirement age beyond 67, Merz has rejected this idea, which was proposed by his party colleague and Minister of Economics, Katherina Reiche. Instead, he emphasized the need to increase the overall working hours throughout individuals' careers. Although longer working hours are not off the table for the coalition, Merz maintains that raising the retirement age is not the solution.

Furthermore, Merz spoke against the elimination of a public holiday during the upcoming pension reform discussions. He mentioned that the reform would examine issues such as exempt assets and the approach to individuals receiving unemployment benefits who refuse to cooperate with job centers. His stance is that those who do not comply should face the assumption that they do not require assistance.

In relation to the ongoing discussions surrounding the citizen's income reform, Merz indicated that the coalition between the Union and the SPD is nearing a consensus on the proposed changes. There are only a few key points left to finalize. Importantly, the name 'citizen's income' will be replaced, with the new legislation set to be titled 'Basic Security Law.'