Germany promises equal pensions for east and west by 2025

Berlin: Germany said on Friday it would gradually raise pensions in the formerly communist east to reach the level of those in the west by 2025, more than three decades after reunification.

The announcement comes as the country is gearing up for a key election next year, with the parties in Chancellor Angela Merkel`s grand right-left coalition keen to woo ageing voters.

"Some 30 years after the fall of the Berlin Wall we should finally have equal pension rights in the east and west," Labour Minister Andrea Nahles said as she presented the package of reforms.

The deal agreed by the coalition government calls for pensions in the east to be gradually increased over seven years from 2018 until the gap with pensions in the west is closed.

At the moment, average state pensions in the east stand at 94.1 percent of the level in the west. 

Germany`s reunification in 1990 posed a major challenge to the state-backed pensions system, as incomes were far higher in the west than the east. While eastern pensions were adjusted upwards over the years, they have never matched western levels.

"Harmonising east-west pensions is an important step towards completing German unity, towards recognising lifelong work and towards equality between all citizens," the labour ministry said in its pension reforms report.

The ministry estimates that boosting eastern pensions will cost 600 million euros ($635 million) in 2018, climbing to 3.9 billion euros by 2025.

The legal retirement age in Germany is 65, but is set to rise to 67 by 2029.