As of: March 17, 2024, 3:42 p.m
By: Bettina Menzel
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The economist and economist Martin Werding at a federal press conference of the Council of Experts to assess overall economic development in November 2023. © IMAGO/dts news agency
The German pension system is under pressure.
A new pension package from Traffic Light aims to keep the level of pension provision constant until 2040.
But who bears the costs?
Munich – The traffic light coalition presented details of its pension package on Tuesday.
The concept attempts to take demographic change and the shortage of skilled workers in Germany into account.
Chancellor Olaf Scholz (SPD) promised to permanently secure the level of pensions.
But who bears the costs?
The pension expert and economist Martin Werding calculated
the costs for the
Süddeutsche Zeitung (SZ) .
The result: In the end, the financing depends on the younger people.
New traffic light pension package: Lindner and Heil are planning these changes
The German pension system is based on the pay-as-you-go system.
This means that people who work pay for pensioners' retirement provisions with their pension contributions.
However, this generational contract is being put to the test by demographic change.
There are more and more pensioners and fewer and fewer contributors.
In purely mathematical terms, the pension level should continue to fall.
Almost half of all German pensioners (42 percent) already have a monthly net income of less than 1,250 euros.
The question of “intergenerational justice” arises again and again.
The draft law by Finance Minister Christian Lindner (FDP) and Labor Minister Hubertus Heil (SPD) now envisages fixing the pension level at at least 48 percent by 2040.
The pension provision is therefore 48 percent of the current average wage of an employer who has paid pension contributions for 45 years.
However, this level cannot be met from current pension contributions alone, which is why the contribution rates for pension insurance must increase.
Traffic light pension package: generational capital should fill pension funds with ten billion euros per year
The so-called generation capital is intended to compensate for the financial gap.
This is about money that the Federal Republic of Germany procures cheaply and invests in the long term - including in stocks.
In addition, the federal government wants to invest assets worth 15 billion euros in the fund by 2028.
From 2036 onwards, this should fill pension funds with ten billion euros annually.
But it's a drop in the ocean for employers and employees: According to calculations, the contribution rates will fall by just 0.3 percentage points.
The rate for pension insurance contributors is currently 18.6 percent of wages, which is “lower than in Helmut Kohl’s time,” as the Ministry of Labor announced.
The pension system is already under pressure, but the peak has not yet been reached.
“The effects come gradually, but then become stronger year after year,” is how Martin Werding, a member of the Federal Government’s Council of Experts for the Assessment of Overall Economic Development, better known as economics, puts it.
According to the draft law, pension spending would roughly double from the current 372 billion euros to 755 billion euros by 2045 due to demographic change.
With the planned fixation at 48 percent, expenditure even rose to 800 billion euros.
According to Werding, the additional costs will be 520.5 billion euros by 2045.
There are also federal subsidies.
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Economics calculates the costs of the traffic light pension package: who pays how much?
And who pays what?
The taxpayer pays for federal subsidies.
And the additional costs?
Employees’ pension contributions are set to increase from 2028.
The contribution then increases by 1.4 percentage points.
Anyone who retires before then is spared from the increase.
“The people born in 1960 are the last ones who are not burdened,” said the economist Werding to the
SZ
.
So in the end it depends on the younger people.
According to Werding’s statement, “those who are starting to work now will be put under the greatest strain.”
Even without the traffic light pension package, the contribution rate would have to rise, but it is now rising faster: instead of 21.2 percent in 2035, it will then be 22.3 percent.
According to the Ministry of Labor, the contribution rate through generational capital should remain stable until 2045.
However, the younger contributors have nothing of this: “The younger people have to pay higher contributions, but later receive the same pension level as before,” comments Werding.
Criticism of the traffic light pension package came from many quarters.
As an alternative to the current concept, some have called for an increase in the retirement age.
“In the long term, raise the retirement age beyond 67 and finally abolish early retirement without deductions for those who have been insured for a particularly long time,” said Employer President Rainer Dulger.
Federal Economics Minister Robert Habeck (Greens) also suggested more financial incentives for people who continue to work after retirement age.
“It would then become even more financially worthwhile to work longer and everyone would get more out of it,” says Habeck.