Baden-Württemberg to use €200m in pension assets to fund budget

The German state of Baden-Württemberg will use €200m in interest and dividend income from its pension assets to help finance public spending in 2027, as it grapples with a weak economic environment.

The state will use the income for the first time to help cover €1.2bn in financial support for municipalities next year, according to the draft 2027 budget approved by the state’s cabinet this week.

Allocations to the budget reserve and the pension fund will also be reduced by €1.4bn in 2027 compared with the previous financial plan.

Baden-Württemberg’s finance minister, Danyal Bayaz, acknowledged that the measures to finance next year’s budget “don’t necessarily appear on page one of the textbook on sustainable fiscal policy.”

“We are deeply concerned about the difficult financial situation of the municipalities. However, we cannot simply lurch from one aid package to the next in the long run; we also need structural reforms,” he added.

Baden-Württemberg has around €13bn in assets set aside for civil servants’ pensions, a figure expected to rise to €20.2bn by 2060, according to the Statistical State Office.

German federal states build up pension reserves for civil servants, who do not pay contributions into these funds. However, states are increasingly turning to pension assets to help finance public expenditure.

In 2025, Schleswig-Holstein changed the rules governing its pension fund to allow withdrawals in 2026 and 2027, aiming to limit the impact of pension liabilities on its budget.

Withdrawals of up to €300m are planned to cover pension-related expenditure this year, according to the state government’s plan.

Brandenburg, meanwhile, plans to suspend contributions to its pension fund in 2027 and 2028, according to its draft budget for 2027 and 2028.

The state cabinet intends to finance pay increases for 35,000 civil servants, ordered by the Constitutional Court in 2025, by withdrawing €424m from the pension fund, according to reports.

North Rhine-Westphalia will transfer €570m from its pension fund to the state budget this year while suspending contributions, according to its 2026 budget plan.