Germany's government pension experts have proposed two big changes: raising the age when people can retire and creating a government-run investment fund to help pay for pensions. Chancellor Friedrich Merz supports the plan, according to Reuters reporting from 23 June 2026. His backing gives it a real chance of becoming law.

The model Germany is looking at comes from Sweden. Here's how it works: instead of relying entirely on current workers' paychecks to pay current retirees (the traditional system), the government would also collect money into a fund and invest it in stocks and bonds. The profits from those investments would then go back into the pension system to help pay benefits. Sweden did this in the late 1990s, and now Germany — the biggest eurozone economy — is considering the same approach.

Why This Matters Now

Germany has a math problem. There are fewer working-age people and more retirees than ever before. The post-war generation is reaching retirement age, which makes the problem worse. Right now, workers and employers pay a percentage of wages into pensions, which gets paid directly to retirees. If nothing changes, that percentage would need to jump sharply within the next 10 years to keep benefits at current levels. That would mean higher costs for workers and businesses at a time when there are fewer workers supporting more pensioners.

Raising the retirement age is simple in principle: people would work longer, pay in longer, and collect benefits for fewer years. Germany's current retirement age is set to reach 67 by 2029. The commission wants to go higher — probably tied to how long people live, so the age automatically adjusts without politicians having to vote on it each time.

The Investment Fund Idea

A Swedish-style investment fund would work like a savings account for the entire pension system. Instead of all the money coming straight from workers' paychecks, some would be invested to earn returns. Those returns would help pay future benefits and take some pressure off working people to pay higher contributions.

Running such a fund in Germany is trickier than it sounds. Sweden's investment funds are run by independent boards protected from political pressure. Germany would need to create a similar structure, which means new laws and careful planning. There is also a German tradition of linking what workers put in to what they get out; a big shared investment fund doesn't fit neatly with that principle.

What Happens Next

Merz's support matters. In Berlin, when the Chancellor backs a plan, it becomes harder to simply delay it. But this is only a proposal right now, not a law. It would take 12 to 24 months to turn it into actual legislation, and labor unions will have a say. Unions have resisted raising the retirement age before, because workers in physically demanding jobs — construction, nursing, manual labor — often cannot work much longer and may not live as long as office workers. A blanket retirement age increase would hit them harder.

The fairness question will dominate the political debate. Any final law will probably need to carve out some workers from the age increase, which would cut into the savings the plan is supposed to deliver.

The combination of a later retirement age and an investment fund is the direction experts recommend for pension systems like Germany's. Whether it can actually survive the political process is still an open question.