Increased distribution of retirement benefits for employees in their professional roles

German Government Approves Second Occupational Pension Strengthening Act

The German government has approved a new law, the "Second Occupational Pension Strengthening Act," which aims to increase the number of people with low and medium incomes who secure their old age through occupational pensions. The law, which was reintroduced in the 21st legislative period, was initially not completed in the 20th legislative period (Oct 26, 2021 – Mar 25, 2025).

The law seeks to make it easier for smaller companies to offer occupational pensions, potentially as part of a works agreement. This is crucial as the government identifies gaps in the dissemination of occupational pensions, particularly among smaller companies.

The existing social partner model will be further developed to facilitate the agreement on occupational pensions. The improvements to the statutory pension, which were proposed at the beginning of August, will be paid for with tax money.

Tax incentives for occupational pensions will be increased, and regulations for pension funds will be "flexibilized." Higher risks in savings may lead to higher yields in occupational pensions.

The law also facilitates "opt-out" systems for occupational pensions, where one has to object if a part of the salary is not used for pensions. From 2027, the pension contribution is set to rise from the current 18.6% to 18.8% according to the draft law.

Online voting will be expanded in social elections, following a successful pilot project in 2023. Around 330,000 members of five statutory health insurers cast their votes online in this project. In Germany, around 52 million people were able to determine the social parliaments, including members of the management boards of statutory health insurers.

Barbel Bas, the Social Minister, and Lars Klingbeil, the Finance Minister, both from the SPD, believe that good occupational pensions contribute to a good quality of life in old age. Klingbeil refers to occupational pensions as an important pillar alongside the statutory pension.

However, the German Social Association (SoVD) head, Michaela Engelmeier, stated that the three-pillar model of statutory, occupational, and private provision has failed. Instead, she called for the statutory pension to secure the standard of living again.

The law is scheduled to come into effect on January 1, 2026. The federal cabinet adopted the government draft of this law on September 3, 2025, but a specific date for its discussion in the Bundesrat has not been stated in the available information.

Increased distribution of retirement benefits for employees in their professional roles