Pensions at a Glance 2025: Germany
Table of contents
This country note shows how Germany compares with other OECD countries in Pensions at a Glance 2025. This edition covers recent pension reforms and includes a focus on gender pension gaps.
The average pension of women was 26% lower than that of men in Germany in 2024, with a more pronounced gender gap in West Germany than in East Germany. While the gender pension gap remains above the OECD average of 23%, it has dropped significantly from 43% in 2007. The German gender pension gap largely comes from the mandatory earnings-related pension scheme, and is exacerbated by voluntary pensions, where the gap is larger. By contrast, survivor’s pensions have a strongly mitigating impact: when survivor’s pensions are included the gender gap in mandatory earnings-related pensions is halved, the largest reduction among OECD countries. There is no gender gap in safety-net pensions.
The declining gender pension gap reflects declining gender inequalities in the German labour market, as well as some redistributive elements in the pension system. The gender gap in employment and hourly earnings has declined significantly since the 1950s, which translates into higher pension entitlements for women. In addition, the introduction of childcare credits, the Mütterrente, has contributed to reducing the gender pension gap. The proposed reform of the Mütterrente, which would extend childcare credits for children born before 1992 by six months and bring them in line with credits for later births, could contribute to further reducing the gender pension gap in the short term, albeit at significant cost.
Yet, substantial gender gaps in the labour market remain, which will translate into a substantial gender pension gap in the future as the German pension system retains a strong link between contributions and entitlements. In 2022, German women could still expect to earn 43% less than men over their entire lifetimes, compared to an OECD average of 35%. The gender gap in expected lifetime earnings has declined at a slower pace over the last two decades in Germany than the OECD average. It is primarily driven by large gaps in hours worked and hourly wages, and to a lesser extent by differences in the expected duration of working life: according to OECD data, women on average worked 7.5 hours less per week and earned 21% less per hour than men in 2023, and their careers were 4.2 years shorter.
Due to the sustainability factor, German mandatory pensions render a relatively low future net replacement rate of 53.3% for a person entering the labour market at age 22 in 2024 with a full career on average earnings, below the OECD average of 63.2%. If the sustainability factor were to be suspended permanently, the future net replacement rate would be about 5 percentage points higher. Including voluntary private pension schemes, the German replacement rate increases to 68.0% assuming full-career contributions of 4%. Most countries with below-OECD average replacement rates for an average earner redistribute more and have significantly higher replacement rates for low earners. Among the 20 OECD countries in this position, the replacement rate for a low earner is 17 percentage points higher on average, whereas the Grundrente only increases the German replacement rate for a low earner with full-time employment by 4 percentage points. Germany and Poland are the only ones among these countries where the difference in replacement rates between low and average earners is below 9 percentage points.
% difference of average pension of women relative to average pension of men
Source: Figure 2.1.
Future net replacement rate after a full career from age 22 in 2024, 100% and 50% of average earnings
Source: Table 4.4.
With the German population of working age projected to drop by 23% over the next 40 years, a decline far steeper than the OECD average of 13%, it will be particularly challenging to finance pensions in the future. There is limited space to further reduce replacement rates and the tax wedge is already the second highest in the OECD – despite the mandatory pension contribution rate of 18.6% being at the OECD average. Therefore, extending working lives will be key to finance pensions in the future. In addition to linking the statutory retirement age to life expectancy once it reaches 67 and reducing the attractiveness of early-retirement schemes, Germany could seek tackle some remaining disincentives to delay retirement or combine work and pension receipt.
Despite strong growth in employment rates of older workers in Germany since 2000, there are still relatively few people who combine work and pension receipt: in 2023, 14% of recent pensioners continued working in Germany, compared to 22% among European OECD countries on average. In Germany, half of those continued working as before, whereas the other half continued working with changes such as reduced working hours or a new job. After abolishing the earnings limit for early pension recipients in 2023, the government now plans to introduce a tax-free allowance on earned income of EUR 2 000 per month in 2026 for employees subject to social contributions who continue working after reaching the statutory pension age. Early retirees continue to build up pension entitlements if they are employed resulting in higher pensions. After the normal retirement age, employees are exempt from paying pension contributions, but their employers still have to pay contributions while no further pension entitlements are built up. The employee can waive the exemption and pay contributions as well, in which case additional pension entitlements are accrued.
Germany allows for mandatory retirement clauses to be included in employment contracts and collective agreements, which can automatically terminate the employment relationship from the normal retirement age onward. About half of OECD countries still allow such mandatory retirement practices for private-sector workers, but often only a few years after workers reach the normal retirement age. As mandatory retirement restricts older people’s choices and are an obstacle to longer working lives, the OECD recommends that countries seek to discourage mandatory retirement in close consultation and collaboration with employers’ and workers’ representatives.
German relative old-age poverty is slightly lower than the OECD average
The working-age population will shrink fast
Pension financial assets are low in Germany
German retirees will have lower pension replacement rates than the OECD average
Contact
Wouter DE TAVERNIER (✉ wouter.detavernier@oecd.org)
Monika QUEISSER (✉ monika.queisser@oecd.org)
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The full book is available in English: OECD (2025), Pensions at a Glance 2025: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/e40274c1-en.
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