“The welfare state we have today is no longer financially sustainable,” German Chancellor Friedrich Merz stated at a CDU event at the end of August.

His remarks follow the government’s agreement to push through a reform of the pension system, aimed at containing the deficit. To address this, Merz proposed incentivizing private savings from an early age as a potential solution.

The “Early Start Pension” initiative suggests that children aged six to 18 attending school would receive €10 per month from the German government, which would be invested in their retirement fund. Over 12 years, this would accumulate to €1,440.

Additionally, starting at age 18, young people could make voluntary contributions to the account. Earnings would remain tax-free until retirement, at which point beneficiaries could access the accumulated benefits.

According to the Financial Times, the annual cost of the subsidy is estimated at around €1.5 billion. Through this program, Germany aims to promote private savings plans as a way to secure future pensions.

One measure set to take effect in 2026 is “active retirement,” which allows retirees to re-enter the workforce without losing their pensions and without paying taxes on up to €2,000 per month. The plan also includes an increase in the retirement age—from the current 66 to 67 in 2031.

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