Germany's Federal Cabinet Approves Pension Reform Bill
The Federal Cabinet has given the green light to the 'Second Act to Strengthen Company Pension Provisions and Amend Other Laws', marking the official start of its legislative journey. The Bundesrat will assess the draft in due course, with the exact date yet to be specified. The bill, forwarded to the Bundesrat on 5 September 2025 as 'particularly urgent', aims to expand and strengthen occupational pension provision, particularly for smaller companies and low-income employees.
At the heart of the bill is a move to make the right to severance pay more flexible, promising significant simplification and reduction in bureaucracy. The goal is to open up new opportunities for non-tariff-bound companies and their employees to participate in occupational pensions more easily, efficiently, and securely. The Normenkontrollrat (NKE) has recommended examining the possibility of raising the threshold for the consent-free settlement of small pension entitlements from one to two percent of the monthly reference amount. The Bundesrat's opinion on the bill and the federal government's response will be provided promptly.
The 'Second Act to Strengthen Company Pension Provisions and Amend Other Laws' is set to undergo scrutiny by the Bundesrat, with the potential to significantly impact occupational pension provision. While the bill promises simplification and reduction in bureaucracy, the NKE notes that it falls short of its full potential for bureaucratic relief. The final outcome of the legislative process remains to be seen.
