Germany's pension commission eyes Swedish-style capital pillar as reform template

Around 90 percent of Swedish employees have occupational pension provision, a level far higher than in Germany. In Sweden, all individuals pay into the pension system, including the self-employed and civil servants, and all can decide from a certain age when to retire. The earliest possible retirement age is currently 64 for those born in 1963 or later, and the threshold is tied to life expectancy, which means it is expected to rise further. There is no regular statutory retirement age in Sweden.

The default fund and individual choice

Sweden's premium pension lets insured individuals choose from several hundred funds according to their own risk tolerance. Those who do not actively choose a fund, which is often the case, have their contributions automatically placed in the state default fund AP7 Såfa. The fund invests premium pension money entirely in equities while the saver is young and gradually shifts toward fixed-income securities later in life to reduce risk. According to the reporting, 'Auch wenn er zwischendurch - etwa in der Finanzkrise - Einbrüche verbuchen hat, hat sich vor allem die Investition in den staatlichen Fonds AP7 Såfa in der Vergangenheit für die Schweden ausgezahlt.'

The AP7 Såfa fund invests globally, uses derivatives and charges comparatively low fees. Blank notes that past income losses for retirees in Sweden were offset by tax relief measures: 'Einkommensverluste der Rentnerinnen und Rentner seien in der Vergangenheit zwar durch Entlastungen bei den Steuern wieder ausgeglichen worden, doch gehörten diese Schwankungen zur Wahrheit mit dazu, meint Blank.' Sweden has experienced nominal pension cuts in 2010, 2011 and 2014, and people who have paid insufficient contributions are entitled to a tax-financed 'guaranteed pension' (Garantierente).

Dr. Matthias Voelkel, head of Börse Stuttgart, points to the long-term performance of broadly diversified capital market investments: 'Kriege, Finanzkrisen, Ölkrisen, Inflationsschocks und Rezessionen haben Märkte zeitweise massiv einbrechen lassen, langfristig entwickelten sich breit gestreute Kapitalanlagen dennoch positiv.' Sweden has built public acceptance for stock investments for retirement and wealth-building since the 1970s, regardless of which political party was in government.

Limits of capital funding

Blank cautions that capital-funded schemes alone do not solve the underlying demographic challenge: 'Kapitaldeckung allein außerdem nicht das Kernproblem des demografischen Wandels löse: Wenn immer weniger Erwerbstätige für immer mehr Rentner aufkommen müssten, verschwinde dieser Druck nicht einfach durch Aktienkäufe.' The article was first published on 20 April 2025 by Klaus Weber and Frank Bethmann of the ZDF Wirtschaft und Finanzen team, with ZDF capital correspondent Wulf Schmiese reporting pre-coverage of the commission's handover.

In Germany, the pension commission does not propose extending mandatory pension contributions to civil servants, even though Sweden requires civil servants to contribute. Germany is currently discussing whether to require the self-employed to pay into the pension system, similar to the Swedish approach. Blank's overall message is that capital funding changes the mechanics of retirement saving but does not remove the pressure of an ageing society.

Political scientist Wolfgang Schroeder has been consulted about the Pension Commission's results. The commission is scheduled to present its proposals to the Federal Chancellor and the Minister of Labour. The handover, pre-covered by Schmiese on 20 June 2026, is set for Tuesday 21 June, with follow-up coverage on 22 June 2026.

What the German commission proposes

Voelkel's contribution highlights the gap in German saving behaviour: 'In Deutschland herrscht in großen Teilen der Bevölkerung Skepsis gegenüber Aktienanlagen. Auch das ist sicher ein Grund, warum die meisten Deutschen ihr Geld auf unattraktiven Sparbüchern parken, deren Verzinsung gering ist.' Pensions in Sweden are generally higher the more a person earns and the later they retire, an explicit incentive built into the system.

Taken together, the Swedish model blends a universal pay-as-you-go pillar with a mandatory capital-funded component, an automatic default fund, broad fund choice for those who want it, a guaranteed minimum pension and a retirement age linked to life expectancy. The German commission's recommendation is to graft the capital pillar onto the existing system while leaving the pay-as-you-go core untouched.