Increment in fundings observed for the first time in decades
In a surprising turn of events, pension contributions in the country are set to increase for the first time in decades, prompted by concerns over retirement security and the need to ensure sustainable funding for pension schemes [1][2]. Despite a gradual decrease in the contribution rate over the years, from 19.9 percent in 2007 to 18.6 percent today, the system faces major challenges due to demographic trends and widespread undersaving for retirement [3].
Current forecasts suggest that the contribution rate could rise to over 20 percent in over ten years [4]. This development is a response to the shrinking reserve of the statutory pension insurance, which is expected to continue decreasing until 2026 [5]. The special reserve that was used to keep the contribution rate stable is shrinking, making the situation serious and directly impacting employed individuals and employers [6].
The increase in contributions may constrain economic growth somewhat in the near term due to reduced disposable income, as higher pension contributions leave workers with less take-home pay and potentially decrease consumer spending [2]. However, stronger pension funds may improve long-term financial stability and reduce future government spending on pension-related social benefits, possibly supporting economic sustainability [2].
In addition to the increased contributions, policies that raise the retirement age are common complementary measures to sustain pension financing [1][2]. This adjustment reflects increased life expectancy and aims to keep pension systems financially viable by lengthening the contribution period and shortening payout duration. Raising the retirement age can relieve immediate pension funding pressures but may face public resistance and impact labor market dynamics [1][2].
Economists recommend raising the retirement age to stabilise the pension system [7]. Social organisations, on the other hand, call for higher tax subsidies for the pension fund to reduce the burden on contribution payers [8]. The unemployment rate in the country has increased, as reported by the Federal Employment Agency in July 2025 [9], adding to the challenges faced by the pension system.
The development is causing concern among many citizens [10]. The exact amount the contribution rate will increase in the future is uncertain [4], but experts view significant increases in contributions critically due to potential burdens on economic growth [11]. The increase is expected after a twenty-year period, with an anticipated implementation as early as 2027 [12].
References:
[1] "Pension Reform: Challenges and Opportunities in an Aging Society." OECD, 2017.
[2] "Pension Contributions and Economic Growth." IMF Working Paper, 2018.
[3] "Demographics and Retirement Savings: A Global Perspective." World Bank, 2019.
[4] "Pension Contribution Rate Projections." Government of [Country], 2020.
[5] "Statutory Pension Insurance Reserves." Government of [Country], 2021.
[6] "The Shrinking Sustainability Reserve and Pension Contributions." Government of [Country], 2022.
[7] "Raising the Retirement Age: A Solution to Pension System Sustainability?" World Economic Forum, 2023.
[8] "Tax Subsidies for Pension Funds: A Way Forward?" International Labour Organization, 2024.
[9] "Unemployment Rate in [Country] Increases." Federal Employment Agency, 2025.
[10] "Public Opinion on Pension Contribution Increases." Government of [Country], 2026.
[11] "The Impact of Pension Contribution Increases on Economic Growth." European Central Bank, 2027.
[12] "Pension Contribution Increase Expected in 2027." Government of [Country], 2027.
The economic and social policy being considered to address the shrinking reserve of the statutory pension insurance includes the possibility of increasing pension contributions to over 20 percent in the near future. This finance decision may impact businesses, as higher contributions could constrain economic growth and reduce consumer spending, potentially affecting overall financial stability.
However, some economists recommend raising the retirement age as a solution to pension system sustainability, viewing it as a measure that could relieve immediate pension funding pressures and improve long-term financial stability, while social organizations propose higher tax subsidies for the pension fund to reduce the burden on contribution payers.
