The German Cabinet has passed the Pension Value Determination Ordinance 2026, which is slated to raise statutory pensions by 4.24 percent effective July 1, 2026. This development was announced by the Federal Ministry of Labour on Monday, though the adjustment remains subject to the approval of the Bundesrat.
Federal Minister of Labour, Bärbel Bas (SPD), described the pension adjustment as “good news” for retirees, stating that it allows pensioners to share in the “prosperity development of the working population”. According to Minister Bas, this linkage to wages ensures the stability of the statutory pension system, a point she stressed was vital, especially during uncertain times.
Part of the implementation of the 2025 pension reform was the extension of the pension level floor until July 1, 2031. The principal factor guiding the calculation for this pension adjustment was the relevant wage development of 4.25 percent, data derived from the Federal Statistical Office concerning the development of contributions required from insured persons. This adjustment will be executed through the Pension Value Determination Ordinance 2026 and takes effect on July 1, 2026.
While the reform is intended to stabilize pensions, the federal government now faces significantly higher costs in both the current and upcoming years than originally planned. The fixed pension level of 48 percent is set to generate supplementary costs. This year, the federal government must transfer 408 million euros to the pension fund, an amount rising to 816 million euros in 2027, totaling approximately 1.2 billion euros. This information comes from the German Pension Insurance’s statement regarding the Pension Value Determination Ordinance 2026.
This ordinance governs the standard annual pension increase scheduled for July 1st. The expected 4.24 percent rise for this year is an increase over the previously projected 3.7 percent. The reason for this higher rate is the wage growth observed last year, which was stronger than anticipated and has been incorporated into pension calculations.
A ministry spokesperson stated that the resulting extra costs would need to be covered in 2026 as an “extraordinary expense”. Furthermore, the additional reimbursement amount projected for 2027 must still be incorporated into the federal government’s discussions on the core figures for the federal budget.