Occupational Pensions Get Costlier as German Workers Lose Faith in State Retirement

German companies are facing a steep hike in pension liabilities, even as an overwhelming majority of workers no longer believe the statutory system will sustain them in old age. A survey of 37 DAX and MDAX firms reveals that employers are pouring ever more generous benefits into occupational pension schemes, yet the financial ground beneath these promises is shifting.

Pension burdens mount

According to the "German Pension Finance Watch" compiled by Willis Towers Watson, DAX companies saw their pension obligations climb 7 percent to reach €428.8 billion. The culprit: a falling discount rate, which dropped 42 basis points in the second quarter of 2026 to 1.70 percent. The arithmetic is stark: to guarantee a lifelong monthly occupational pension of €1,000, an employer must set aside between €240,000 and €400,000 depending on actuarial assumptions. For medium-sized firms, the figure can be prohibitive.

Corporate responses vary widely

Despite rising costs, large corporations are deepening their commitment to occupational pensions as a retention tool. Twenty-one of the surveyed companies offer entirely employer-financed building blocks. The direct commitment model (Direktzusage) is the favourite instrument, used by 29 groups including BMW, Rheinmetall, Evonik and Allianz. The generosity of top-ups differs sharply: Rheinmetall adds 30 percent to employee contributions, while Evonik supplements them by 70 to 80 percent.

Roughly one-third of the companies rely on matching models that reward workers' own savings. The strategy appears to pay off in participation rates: in 23 of the surveyed corporations, more than 75 percent of the workforce makes use of the offers.

Legal clarity for apprentices

A recent ruling by the Federal Labour Court (Bundesarbeitsgericht) has closed a loophole regarding apprentices. If a company agreement (Betriebsvereinbarung) broadly benefits "employees" (Betriebsangehörige), trainees are automatically included unless the employer explicitly excludes them. Companies now face the choice of rewriting their agreements or extending pension entitlements to their junior staff.

Political tug-of-war over early retirement

Alongside corporate developments, a heated political debate rages. Steffen Kampeter, managing director of the Confederation of German Employers' Associations (BDA), is demanding the elimination of penalty-free early retirement. Calculations by the German Institute for Economic Research (DIW) on June 3 suggest this would relieve the state budget by €9.5 billion per retiree cohort. The SPD has rejected the idea, pointing to workers in physically demanding jobs.

A more radical proposal comes from the Halle-Dessau Chamber of Industry and Commerce (IHK), which suggests a "choice retirement model" (Wahlrentenmodell). Under that plan, workers could decide at a young age whether to retire at 65, 68 or 70, with their contribution rate adjusted accordingly from the start.

New savings vehicles on the horizon

A study by Sirius Campus and Aeiforia predicts up to 10 million contracts for the planned Altersvorsorgedepot (state-subsidised retirement savings account) by 2027. With statutory pension contributions set to rise to 19.9 percent by 2028, the future of German retirement appears to hinge on a blend of corporate benefits and personal investment. For now, 82 percent of Germans say they no longer trust the state pension alone to maintain their living standard in old age.

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