Germany proposes a solution to the pension crisis: a monthly ‘salary’ for children aged 6 and over
German Chancellor Friedrich Merz proposed an initiative in which minors between the ages of six and 18 would receive 10 euros per month.
“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.
Addressing the pension deficit has become a key priority for the German government, given the demographic pressures of an aging population. Forecasts from the Cologne Institute for Economic Research (IW) indicate that by 2036, 19.5 million German baby boomers will have retired, while only 12.5 million workers will have entered the labor market.
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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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