The German government on Tuesday approved amended legislation to allow thousands of Jews who worked for the Nazis in World War II ghettos to draw a better pension.
The cabinet passed draft legislation drawn up by the labour ministry to improve the current law on such pensions following negotiations with an official Israeli delegation earlier this year.
"The German government is aware of its historical responsibilities," Chancellor Angela Merkel's spokesman Steffen Seibert told reporters, saying around 40,000 people around the world would benefit from the change.
A law introduced in 2002 allowed Jews who worked in the Nazi-era ghettos to claim a pension from Germany, with payments starting from 1997, but only if they had worked "voluntarily" and "in return for payment", however meagre.
Jews who were forced to work in the ghettos as slave labourers at the time were subject to a separate compensation scheme.
But ghetto workers who applied for a pension after 2002 are only legally entitled to retroactive payments going back four years, a stipulation Germany is now changing to grant all claimants the same pension rights dating back to 1997.
The modified legislation, which must still pass parliament, would see in Israel alone around 13,000 survivors receive an average of 15,000 euros ($21,000) each in outstanding payments, news weekly Der Spiegel reported earlier this year quoting figures from the Israeli government.
"We all cannot imagine today what it meant to work in a Nazi ghetto under inhumane conditions," Labour Minister Andrea Nahles said in a statement.
But tens of thousands experienced this "cruel fate" and waited years for the pension to which Germany had already determined they were entitled, she said.
The Nazis established hundreds of ghettos to isolate Jewish communities. Many were used as transit camps for Jews before they were sent to concentration camps.
Germany says it has paid out the equivalent of more than 67 billion euros in reparations to victims of the Nazis including survivors of concentration camps, ghettos or forced work camps.