Ampel-Coalition plans funded old-age provision: Finally the share pension is coming

Enlarge image

Reform of old-age provision - a little:

The traffic light partners

(FDP),

(SPD),

and

(both Die Grünen) on Wednesday in Berlin

Photo: Ralph Pache / Presscov / imago images / ZUMA Wire

Statutory old-age provision that also takes advantage of the potential returns on the stock market - at last. Experts have been calling for such a model for a long time, while other countries - Sweden, for example - are showing the way. Now the future federal government also wants to enter the "partial funding of the statutory pension insurance", as stated in the coalition agreement between the SPD, the Greens and the FDP. But, that much is anticipated, the plans of the future traffic light partners are still vague. And they do not go as far as some people announced during the election campaign.

The background is clear: the statutory pension insurance has been in chronic need for years. The population is aging noticeably, which brings the system of pay-as-you-go financing into difficulties. And the Riester pension, which was introduced almost 20 years ago by the red-green federal government by Chancellor

and Minister of Labor

(both SPD) to counter the problems with a semi-public solution, disappoints. When looking at their annual Riester decision, many insured persons have the impression that the state allowances paid are almost completely eaten up by the costs of the insurance.

The Riester pension is opaque, expensive and often has a very low return, the Greens found in the election campaign for the most recent federal election.

The party therefore proposed a "citizens' fund" for both company and private provision.

"It guarantees attractive returns, invests in the long term and overcomes the short-term orientation of the markets," the party said on its website.

FDP looks to the Swedish model: AP7 funds at low costs

The FDP brought another proposal to solve the pension problems and to start a funded variant in the coalition negotiations: "We want a statutory share

pension based

on the Swedish model," said

, pension policy spokesman for the FDP parliamentary group in February of this year. According to Vogel, the Swedish model shows how one can invest in stocks with low risk. "We propose that we learn completely from Sweden." He received backing from science:

, professor of public finance at the Ruhr University in Bochum, presented a study that underpinned the liberals' plans.

And what are the Swedes doing?

The country introduced the so-called AP7 fund back in the 1990s.

As a new element in Sweden's pension system, the fund invests entirely in equities, largely through global index funds.

As the retirement age approaches for a Swede, their shares in the fund are gradually reallocated into investments with lower risk.

And the specialty: The Swedes do not pay the contributions for the "AP7-Fonds" in addition to the previous pension contributions.

Instead, the contribution to the country's statutory pay-as-you-go system has fallen by the 2.5 percent that flows into AP7 to 16 percent since the fund was introduced.

Pension insurance is to invest ten billion euros

Not only the FDP favors this method of funded state pension provision. The German consumer advice centers have also taken the Swedes as an example when proposing an "extra pension".

But in vain: As the almost 180-page coalition agreement (here the document in the original wording) shows, none of the models mentioned will probably become a complete reality. Instead, the future government partners are planning something different: On the one hand, the German pension insurance is to receive a financial injection of ten billion euros from federal funds in the coming year, which it is to invest in the capital market. "This partial funding is to be professionally managed and invested globally as a permanent fund by an independent body under public law," says the coalition agreement.

On the other hand, the coalition partners want to "reform" the private part of old-age provision, as it is called in the contract. That means: The Ampel partners apparently want to tackle the problem with the Riester pension - but what exactly will come instead remains unclear and non-binding at first. "To this end, we will examine the offer of a publicly responsible fund with an effective and inexpensive offer with the option of opting out," says the contract of the coming federal government, for example. "In addition, we will examine the legal recognition of private investment products with higher returns than Riester."

So check.

That leaves a lot of leeway.

No wonder that many experts react rather skeptically to the announcements of the traffic light partners.

Ten billion euros, with which the German pension insurance is supposed to invest in stocks and possibly other papers, is

far too little

, according to

from the German Institute for Economic Research in Berlin (DIW).

"An amount in the three-digit billion range would be necessary," said the pension expert when the plans became known in October, according to Tagesschau.de.

Such an investment could actually support the pension, i.e. dampen the rise in the contribution rate and stabilize the level, said Geyer.

Concerns about pressing pension problems

"It would make more sense to invest a small part of the statutory pension contributions on the capital market on a permanent basis," says

, director of the Labor and Qualification Institute at the University of Duisburg-Essen.

That would be the Sweden model - but nothing will come of it for the time being.

Alexander Ludwig

is also critical

, Professor of Public Finance at the University of Frankfurt, on the pension plans of the coming federal government. "I think the entry into the funded pension insurance is basically good", said Ludwig in an interview with manager magazin. "But it comes far too late and will not solve the problems that we will have with pension insurance in the next ten to 15 years." According to Ludwig, it would rather be necessary to lower the pension level and increase the retirement age. However, according to the coalition agreement, neither should take place. "That means that the future government will have to finance the resulting gaps in pension insurance through taxes," says the pension expert. "Against this background, tax increases appear very likely."

A remarkable detail in this context: An explicit rejection of tax increases is missing in the coalition agreement - in contrast to the exploratory paper of the parties from October, which still contained such a passage.

And Ludwig is bothered by another aspect: "The planned fund for the fully funded pension insurance should not be administered by the state, but by the private sector," he says.

"I don't have a good feeling when the state manages such a pension fund. You don't know what developments the future will bring, in case of doubt the assets of the fund may not be safe from the state - not even in Germany."

Kenfo - a functioning role model in Germany

The Kiel Institute for the World Economy (IfW) argues in a similar direction. The topic of pensions will "rather be managed than actually meeting the demographic challenges," said the IfW on Wednesday after the presentation of the traffic light plans. The economists from the Baltic Sea coast describe the entry into capital coverage as "commendable". However, this would likely require additional debt to be borrowed.

So there is a lot of headwind for the future federal government in its plans to enter the at least partially capital market-covered pension insurance. Perhaps the coalitionists should have trusted themselves more. There is a possible role model for this not only in Sweden and elsewhere beyond the borders, but already in this country. We are talking about the "Fund for the Financing of Nuclear Waste Management", or "Kenfo" for short, a federal foundation that is supposed to finance the interim and final storage of radioactive waste from local power plants. In 2017, the 25 German nuclear power plant operators paid a total of 24.1 billion euros into the fund. Since then, the money has been collected from the foundation management with the

the board,

- an investment expert with positions such as Allianz, Pimco and Union Investment on her résumé - invests in private equity, in private debt and in infrastructure.

And apparently with success.

"As of today, one can say that the past four years have been a success story for Kenfo," said Mikus recently at the presentation of the 2020 annual results. Overall, based on the market values ​​of its portfolio and minus costs, the fund had a plus of up to the end of May 2021 Generated 2.5 billion euros.

Mind you: with an initial volume of 24.1 billion euros.

Millions of people in Germany's statutory pension insurance would undoubtedly be happy about such a performance.