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28 April 2017

Germany: differentiated pension increases on 1 July 2017

The government has decided that German pensioners will receive a small increase in their pensions from 1 July 2017, with an increase of 1.9 % for pensioners in former West Germany and 3.59 % for those in the East.

This increase has been calculated on the basis of the wage increase calculated by the Federal Statistical Office and what is known as the system’s ‘sustainability factor’, which takes into account the change in the ratio of taxpayers to pensioners.

As a result of this increase, the value of pensions in the Länder of the former East Germany will reach 95.7 % of those in the western Länder (previously 94.1 %). The government’s objective, which was announced at the presentation of its new concept for pension reform (see article of 27/1/2017), is to bring pensions in the east up to the level of those in the west by 1 July 2024, costing EUR 3.9 billion per year by 2025.

The draft legislation must be approved by the Bundesrat before being enacted. It will enter into force on 1 July 2017. Insofar as it is a purely mechanical increase, the DGB confederation has not reacted to the announcement because it is in favour of aligning pensions in the East and the West. However, it rejects the fact that the alignment will be based on a 46 % replacement rate (instead of the current 48 %).

Source: press release from the Minister for Labour and Social Affairs.

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