As of: March 8, 2024, 1:14 p.m
By: Patrick Freiwah
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Social security contributions in Germany are becoming an ever greater burden. In the coming years, contributions for pensions, health insurance, etc. will rise massively.
Berlin/Munich - The German social system is facing a breaking point, as social insurance contributions can apparently no longer finance the volume of expenditure.
For this reason, the taxes for social insurance contributions such as health, pension and nursing care insurance will increase again in the coming years.
Depending on their income, this results in significantly higher expenses for employees, which shrink their net income and thus affect their wallets.
The working population will have to spend more money in the coming years for the Federal Republic's social system, which is considered generous.
Social security contributions are rising - higher contributions for pension insurance
In addition to the introduction of the so-called stock pension, the federal government's new pension package also includes higher contributions for pension insurance: the current contribution rate of 18.6 percent will remain in place until 2027, but from the following year (2028) it will increase to 20 percent provided.
By 2035, the contribution rate for pension insurance is expected to rise to 22.3 percent.
How do higher social security contributions affect pension insurance?
Currently, with a gross income of 3,000 euros, a pension insurance contribution of 558 euros is due - which the employer and employee share in half.
From 2028, the taxes would rise to 600 euros - meaning the additional burden for a working person would be 21 euros per month.
A few years later, the difference is now noticeable by almost 60 euros less each month.
Health card from health insurance companies in Germany: Social security contributions for health insurance etc. will increase in the coming years.
© IMAGO/Zoonar.com
Contributions to health insurance: billions in deficit due to high expenses
In Germany, in addition to pensions, statutory health insurance (GKV) is also a problem child.
There is a large imbalance in expenses and income - so adjustments are inevitable.
The local health insurance companies are expecting a billion dollar deficit for 2024.
The result: Experts expect health insurance contributions to increase by two percentage points - the current contribution rate is 14.6 percent.
As a result, there are likely to be increases in the additional contributions - which are charged individually by each health insurance company.
According to Günter Neubauer, director of the Institute for Health Economics (IfG), an increase in health insurance contributions to up to 17 percent of income is possible in the long term.
Where there is a risk of even higher social security contributions: Germany's nursing care funds are stretched and need additional income to meet the massive expenses.
Statutory nursing care insurance will no longer be financed with the current contributions from 2025, says the AOK Federal Association and explains that millions of insured people will face higher contributions.
Experts like Neubauer expect contributions to increase to around 5.7 percent.
There was already a reform here last year, since then people without children pay four percent of their income.
“Our figures show that Minister Lauterbach's promise that the reform will ensure the financing of long-term care insurance throughout the entire electoral period is difficult to keep,” the
editorial network Germany (RND)
quotes Carola Reimann, the association's CEO, as saying.
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Social security contributions must increase - otherwise there is a risk of contributions exceeding 50 percent
The reforms seem to be urgently needed so that the total contribution rate for social insurance does not rise even more drastically:
Focus.de
cites forecasts from the association “The Young Entrepreneurs”, according to which the total contribution rate for pension, health, nursing care and unemployment insurance will rise by 2050 Today around 40.9 percent rises to over 50 percent in order to finance the German social system.
Speaking of unemployment insurance: The current contribution for the ALV is 2.6 percent, an increase is expected to follow in 2025.
Economists therefore expect per capita spending to increase to three percent.
Given the higher burden of social security contributions, the shrinking of disposable income can only be offset by higher wages - or by more savings.
While average and high earners will face higher monthly social expenses in a few years, the situation is different for mini-jobbers and low earners who are subject to social insurance contributions: They pay no social expenses at all or pay less, because there is currently a reduced contribution obligation up to a monthly income of 2,000 euros.
Study shows inequality in tax relief from the federal government
Meanwhile, an evaluation by the German Economic Institute (IW) shows that numerous low to average earners will pay more money in taxes in 2024, because many things have become more expensive at the turn of the year: In addition to social contributions, the CO2 price for fossil fuels has also risen VAT increases (catering and on gas) as well as increasing network fees on electricity.
The tax relief due to adjusted allowances has a cushioning effect.
However, according to the institute, there is an imbalance here: the bottom line is that a single with an annual gross income of 50,000 euros pays around 40 euros more in taxes and duties.
Meanwhile, a family with two children and a combined gross annual income of 130,000 euros has 262 euros more, while a family with an annual income of 42,000 euros has 33 euros less.
According to the information, single parents with children are hit hard: According to the IW calculations, an annual gross income of less than 36,000 euros would result in a loss of 144 euros.
According to the IW, in the end taxpayers would still have to pay for “the government’s failures and the inappropriate and unconstitutional budget policy”.
(PF with material from AFP)