Pension reform 2025: Mother's pension III and first details on payouts!

Pension reform 2025: Mother's pension III and first details on payouts!

On June 14, 2025, a far-reaching “immediate program” was decided in Germany by the federal government, consisting of the Union and the SPD. This program includes around 60 measures with the aim of facilitating investments and overcoming economic stagnation. The focus is on a fundamental pension reform that should guarantee a pension level of 48 percent of average income by 2031. This is particularly important given demographic changes that are putting increasing pressure on pension systems.

A central component of this reform is the mother's pension. Since January 1, 2014, parents have received financial recognition for their time raising children, which was expanded in 2019 by the mother's pension II. For children before 1992, up to 2.5 years of child-rearing are counted, while for children from 1992 even three years of child-rearing are counted. The planned mother's pension III is intended to eliminate these inequalities and enable all parents to be treated equally, regardless of the year of birth of their children. It is planned that after the reform parents will receive three pension points for each child, but the financing concept for this reform is still pending. The social association VdK describes the maternity pension reform as “long overdue” and calls for financing from tax revenues.

Pension reform 2026 and beyond

The new federal government under Friedrich Merz has set out comprehensive reforms in pension provision in the coalition agreement. The goal of the pension reform 2025/2026 is to secure the pension level of 48 percent until at least 2031. This is supported by the increase in statutory pensions by 3.74 percent from July 1, 2025, which corresponds to a monthly increase of around 66.15 euros for a standard pension after 45 years of contributions. The pension value then increases to 40.79 euros, which benefits around 21 million pensioners.

Another innovative step is the introduction of the active pension, which enables pensioners to earn up to 2,000 euros tax-free. In addition, an early start pension will be introduced for certain professional groups from 2026 in order to create more flexible transitions into retirement. Such measures are necessary because the pension system in Germany is in a precarious situation, with a declining number of contributors and an increasing number of retirees.

Financial challenges and future forecasts

Demographic developments mean that 61 percent of pensioners receive less than 1,200 euros net per month. A third of pensioners even have to make do with less than 750 euros net, which often puts them below the at-risk-of-poverty threshold. Statutory pension insurance is financed through a pay-as-you-go system, with current pension payments being covered by contributions from the working population. But the low birth rate and increasing life expectancy lead to serious financing problems in the long term.

The federal government is currently covering around 30 percent of pension insurance expenses, which make up more than 25 percent of the federal budget. Forecasts show that by 2025 the holding line for pension contributions will be a maximum of 20 percent of average earnings; currently this is 18.6 percent. Nevertheless, rising poverty rates in old age, especially among women with interrupted working histories, as well as falling contribution figures will continue to fuel the discussion about tax increases or savings elsewhere.

The challenges are therefore great, and by introducing a uniform pension system that also includes the self-employed and civil servants, the government wants to look for possible ways to stabilize the pension system. Concepts and reform proposals for this are being developed by a pension commission.

The discussion about the financial future of pension provision remains a central topic in the coming years, as the pressure grows to find solutions that both ensure adequate benefits for current and future pensioners and help overcome the final financing hurdles.

For further details on this complex topic, please read the reporting from fr.de, buerger-geld.org and deutschlandfunk.de.