CapitalPathCapitalPath

CapitalPath Weekly

One income is not a plan

What actually happens in Germany when a salary stops because of redundancy, long illness, losing the ability to work or retirement, what the 2027 figures change, and why a cash buffer, income protection and a second option come in that order.

Nilesh Kulkarni · CapitalPath

Read the German version

Abstract illustration: an income line that breaks off, with three steps below it: a cushion, a shield and a second, parallel line.

Why this matters

Most household budgets quietly assume that the same salary will arrive every month. When it stops, the reason is usually one of four things: the job ends, an illness goes on longer than anyone expected, health no longer allows the work to continue, or retirement arrives. German social insurance has a benefit for each of these situations. None of them replaces your previous take-home pay in full, and each comes with its own conditions, waiting periods and time limits.

There is a timely reason to look at this now. On 7 October 2026 the Federal Cabinet adopted the social insurance reference values for 2027, which among other things set the income ceiling used to calculate sickness benefit. Meanwhile, the major pension reform proposed by the pensions commission in June has still not appeared as a draft bill. This piece separates what already applies, what has been adopted but is not yet in force, and what is still taking shape.

What changed

  • CONFIRMED

    Sickness benefit (Krankengeld): after the employer has continued paying wages, normally for six weeks, the statutory health insurer pays 70% of regular gross pay up to the contribution ceiling (€5,812.50 a month in 2026), capped at 90% of previous net pay. Including the employer's six weeks, it is limited to 78 weeks within three years (BMG, as of 3 September 2026). Unemployment benefit (Arbeitslosengeld): 60% of a standardised net wage, or 67% if you or your spouse or partner have at least one child as defined in income tax law. You normally need at least 12 months of insured employment within the last 30 months; under 50, benefit lasts for at most 12 months, rising in steps to a maximum of 24 months from age 58 (Federal Employment Agency). Reduced earning capacity pension (Erwerbsminderungsrente): this generally requires five years of insurance and three years of compulsory contributions in the five years before the onset. Someone who, because of illness or disability, can work less than three hours a day for the foreseeable future counts as fully reduced; three to under six hours counts as partly reduced, and the partial pension is half the full one. The test looks at any work on the general labour market, which is a much stricter standard than the job you actually did (Social Code Book VI, section 43; Deutsche Rentenversicherung). State pension: until the adjustment on 1 July 2031, pensions are uprated so that the pension level reaches at least 48% (BGBl. 2025 I No. 362).

  • PROPOSED

    The Federal Cabinet adopted the 2027 reference values ordinance on 7 October 2026, and it still needs the consent of the Bundesrat (BMAS press release of 7 October 2026; Bundesrat document 576/26). It would raise the health insurance contribution ceiling to €6,375 a month (€76,500 a year) and the ceiling for pension and unemployment insurance to €8,850 a month (€106,200 a year). For sickness benefit, that would lift the income limit used in the calculation from €5,812.50 to €6,375 a month in 2027. According to the BMAS, only people whose earnings were already above the current ceilings are affected.

  • STILL DEVELOPING

    The pensions commission (Alterssicherungskommission) presented its report with 33 recommendations on 23 June 2026. According to the Federal Government (2 July 2026), the coalition committee intends to implement them in full and wants the legislative process completed by the end of 2026. The proposals include a compulsory, funded "statutory capital pension" financed by an extra 2% contribution, a gradual rise in the state pension age after 2031 (on current data, from 67 to about 67.5 by 2041) and letting the 48% pension level guarantee expire as planned after 2031. In the official sources checked for this piece, no government draft bill had been published by 11 October 2026. These are recommendations, not law.

Who may be affected

This concerns any household whose regular outgoings depend on earned income, and it matters more the more rests on a single salary, for example with a sole earner or where one partner earns far more than the other. The rules above describe the position of employees in statutory health insurance. If you are self-employed or privately insured, it is worth checking separately which of these benefits apply to you at all, and at what level. And anyone planning their retirement will have to wait and see which of the commission's proposals actually become law. This describes the legal position, not anyone's individual circumstances.

What should people pay attention to?

  • How many months of fixed costs could your savings cover before a benefit starts paying, or while it pays less than your salary did?
  • How large would the gap be between your current take-home pay and sickness benefit, unemployment benefit or a reduced earning capacity pension, and for how long?
  • Is your ability to do your own job protected, or would everything depend on a state pension that measures you against the whole labour market?
  • What does your latest pension statement from the Deutsche Rentenversicherung (Renteninformation) show, and what assumptions sit behind those figures?
  • Is there a second way to bring in money besides your salary, such as a qualification, part-time self-employment or a second income in the household, and what would it take for that to hold up if you needed it?

CapitalPath perspective

CapitalPath works through this in a fixed order. First comes a cash buffer to bridge the weeks and months when a benefit has not started yet or pays less than your salary. Next is protecting your ability to earn, because losing it can take an income away for good, and the statutory pension for reduced earning capacity is drawn much more narrowly than most people assume. Only then does it make sense to look at a second option: another source of income or a skill that does not depend on your current employer. CapitalPath often sums this up in one line: "A salary can stop. Life doesn't." The rent, the family and the plans carry on even when an income pauses.

You can read more about protecting your earnings on the disability income protection page. If you are thinking about building something of your own on the side, Join my team explains how that works at CapitalPath.

Explore this further

Sources & primary documents

Creation note

This content may be created using AI assistance.

A short note

This is general information and orientation, not individual advice.

Back to Insights