Stronger than it has been for decades
Cabinet approves significant pension increase
04/13/2022, 12:08 p.m
The government wants to compensate for the weak year 2021 with a strong increase in pensions. German pensioners can expect an increase of more than 5 percent from July. However, social associations and trade unions are not impressed by this figure alone. The reason: inflation.
The federal cabinet has launched the biggest pension increase in decades. In the west, pensions will rise by 5.35 percent on July 1 after a zero round last year, in the east by 6.12 percent after only a small increase in 2021. In the east it is the strongest increase since 1994, in the west there has been no such increase since 1983.
However, social organizations and trade unions point to high inflation. “The pension increase, which was comparatively good this year, will be completely eaten up by the rising prices,” said Anja Piel, board member of the German Trade Union Confederation.
The draft law by Social Affairs Minister Hubertus Heil also provides for improvements in the disability pension. About three million people should get more money in the long term. Surcharges of up to 7.5 percent are planned from July 1, 2024. In addition, the so-called catch-up factor, which has a dampening effect on pension increases, is to be reinstated.
Pensions are adjusted on July 1 of each year depending on wage developments. If wages fall, the applicable pension guarantee prevents pension benefits from falling as well. In the worst case, there will be zero rounds, like last year. When wages rise again, the catch-up factor is intended to mathematically compensate for this prevented reduction in pensions, so that pension increases are lower. The grand coalition had suspended the catch-up factor, and now it is being reinstated.