Although the German economic climate was overshadowed by a prolonged recession last year, inflationary pressure was lower than in the previous year. The average rate of inflation declined from 5.9 per cent in 2023 to 2.2 per cent in 2024, accompanied by interest rate cuts on deposits. Notwithstanding the continuing difficult economic conditions for businesses, the number of employees subject to social insurance contributions reached a historic high of 35.2 million in October 2024.
This positive development stems from a higher proportion of the domestic population being in employment, as well as the immigration of foreign skilled and unskilled workers. Labour market figures published by the German Federal Ministry of Labour and Social Affairs (BMAS) in 2024 show that demand for skilled labour remains high against the backdrop of demographic change, which is why many companies are making efforts to improve their retention rates.
Growth in contribution revenue despite a challenging economic framework
Compulsory contributions from individuals in gainful employment increased significantly in 2024. A total of 305.9 billion euros in contribution revenue was generated, which is 16.2 billion euros more than in the previous year. This corresponds to a 5.6 per cent increase versus 2023. The positive wage and salary trend was instrumental to this development, as was the robust labour market in a challenging economic environment. According to the final financial result, the total revenue of the German Pension Insurance was 402.0 billion euros. Despite this positive trend, growth in expenditure exceeded growth in revenue. Pension expenditure rose by 5.8 per cent year over year in 2024. Overall, the German Pension Insurance’s expenditure has risen by 6.1 per cent to 402.8 billion euros since 2023.
“The financial position has remained stable thanks to the relatively good situation on the labour market in terms of employees paying social insurance contributions and the positive wage trend.”
Alternating Chair of the Federal Board of Deutsche Rentenversicherung Bund
Reserve equivalent to 1.57x monthly expenditure
The sustainability reserve for general pension insurance is used to compensate mid-year fluctuations in liquidity due to cyclical and seasonal influences. As long as there are plenty of funds in the reserve, they are also available for the purpose of stabilising contribution rates.
As at 31 December 2024, the reserve totalled 44.4 billion euros, which is 0.6 billion euros less than in the previous year. At the year’s end the reserve still exceeded the legally prescribed corridor of 0.2x to 1.5x monthly expenditure.
Pension adjustment
In the wake of recent high gross wage adjustments, the current pension value was raised by 4.57 per cent throughout Germany on 1 July 2024; the first time ever that this has taken place on a nationwide basis. Since July 2024, the current pension value paid for each earning point has been 39.32 euros.
