As of: February 4, 2024, 7:22 p.m
By: Fabian Hartmann
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Federal government advisors rely on a Regensburg economist when it comes to pensions.
He suggests that employees with low wages should be better protected in old age.
Munich - In November (11/8/23), the Advisory Council for assessing overall economic development called “a combination of several pension reform measures” “indispensable”.
Because the pension insurance is facing difficult times.
This means that many cohorts of the baby boomer generation are not about to reach retirement age.
The low birth rates of the late 1990s and 2000s could soon have an impact on the labor market.
The political side now needs to react to this.
As part of his annual economic report, Federal Economics and Environment Minister Robert Habeck (Greens) proposes an increase in employment across all demographic groups.
As a result, Habeck wants to motivate more people to continue working after they reach retirement age.
The CDU is also taking a similar direction in its new basic program.
With an “active pension”, employees who have reached statutory retirement age and still continue to work can earn up to 2,000 extra per month tax-free.
Some economists and other experts also believe that pension reforms are unavoidable.
One of them is economist Fabian Kindermann.
He is a professor of economics at the University of Regensburg, where he specializes in public sector economics.
Currently, his main concern is that people with low incomes receive more pensions.
But how can this work?
Economist Kindermann: We have to do everything we can to keep employees in the labor market
Kindermann believes that “higher pension contributions and cuts in pension benefits” are “pre-programmed” in view of the impending demographic change, as he recently said in an interview with the
Mittelbayerische Zeitung
.
In order to be able to absorb the consequences of demographic change over the next 20 to 30 years, he believes it is essential to mobilize the entire workforce potential in Germany.
“In short, this means that we should do everything possible to integrate potential workers into the labor market and keep them there.
Of course, this also applies to employees over the age of 67,” adds Kindermann.
Contrary to this suggestion, statistics from recent years show that a large number of members of the baby boomer generation would like to retire as early as possible.
Despite this trend, how can we prevent the labor market and pension funds from having even greater problems?
According to the expert, this can only work with legislation that addresses the different needs of older employees.
“Here, on the one hand, you have to create positive incentives for a longer working life and, on the other hand, keep an eye on the needs of those for whom a longer working life is not an option,” emphasizes Kindermann.
In addition, immigration must be controlled in a targeted manner - especially in the area of qualified workers, where there are still immense deficits.
Reform proposal for pension insurance - this is how risk groups should be protected in old age
As a short-term measure, the Advisory Council also recommended strengthening the so-called sustainability factor.
It is part of the pension adjustment formula that is used to calculate annual changes in the pension level.
It takes into account changes in the numerical ratio of pension recipients to contributors.
If the number of pensioners increases faster than the number of contributors, this will have a dampening effect on pension adjustments.
Conversely, it has an increasing effect on pension adjustments.
This year, the sustainability factor increases the pension adjustment by 0.64 percentage points.
Currently, 75 percent of the burden of the aging population due to the sustainability factor is borne by employees and 25 percent by pensioners.
According to the Advisory Council's proposal, the ratio should be 50:50 in the future.
As a result, working income would be less burdened by increasing aging, but pension benefits would have to be reduced as a result.
This in turn would affect different population groups to different degrees.
While some could rely on forms of personal provision as a result of reduced pension benefits, others would not have this option.
This is one of the reasons why Kindermann and colleagues at the University of Regensburg have drafted a reform proposal for pension insurance.
It is intended to protect risk groups of retirement age.
Accordingly, employees with low incomes and consequently low pension entitlements should receive disproportionately high pension benefits.
According to the model, funding for pension benefits for higher-income groups would be cut.
So far there has been little political response to the reform proposal
Although the Council of Experts was so convinced of the reform proposal that it included it in its recommendations in the annual report, according to Kindermann, there has so far been little response from the political side.
One of the reasons for this could be the billion-dollar deficit in the federal budget.
People of retirement age taking a walk © IMAGO
Kindermann emphasizes that he misses the federal government's courage in adapting statutory pension insurance regulations to demographic change, as happened in the early 2000s.
“Since then, however, we have observed the opposite, namely an expansion of pension insurance benefits.
You can hardly blame politics.
Pensioners are a strong voting group and bad news about pensions is often reflected in poor election results,” the economist adds.