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Soon there will be more and more pensioners – and fewer people paying into the system. Nevertheless, pensions should continue to keep pace with wages in the future. But the last word has not yet been spoken.
Berlin – After months of wrangling, the federal cabinet wants to launch the second pension package today. “With the pension package, the federal government is ensuring that the statutory pension remains stable and reliable for all generations,” said Labor Minister Hubertus Heil (SPD) to the dpa. But it is not as simple as that sounds.
What is the aim of the reform?
The traffic light coalition is pursuing two goals with the legislative package: pensions should continue to rise in line with wages in Germany. To achieve this, the pension level of 48 percent should be maintained until at least 2039. It indicates how pensions develop in relation to income. On the other hand, the government wants to build up so-called generational capital using federal funds – in other words, invest money in the stock market.
Which part will be felt more by pensioners?
The pension level is fixed at at least 48 percent. For example, if a trained nurse earning 3,100 euros per month retires in 2032 at the age of 65 after 45 years of work, her pension would be around 1,500 euros instead of around 1,450 euros thanks to the pension package. “That’s an increase of around 600 euros per year,” says the Federal Ministry of Labor.
What is generational capital used for?
Pension contributions are not expected to rise as much. Today, the contribution rate is 18.6 percent of income. Without reform, it is expected to rise to 20.2 percent by 2030 and 21.3 percent by 2040, according to official forecasts. According to the draft law, only securing the pension level without generational capital would push the contribution rate up to 22.6 percent by 2040. The interest income from generational capital is expected to ensure that it then remains at 22.3 percent.
What exactly is generational capital?
The government wants to take on debt that will not be counted towards the debt brake. This year, that will initially be 12 billion euros, and in the coming years it will be slightly more. Federal assets will also be transferred. At least 200 billion euros will be invested in this way by the mid-2030s. An initial 10 billion euros per year from the stock market earnings will then flow to the statutory pension insurance scheme.
What happens after the cabinet decision?
The government now wants to speed things up so that the generation capital can be set up in 2024. The Chancellery has written to the states in the Bundesrat asking them to shorten the deadline for their deliberations so that the state chamber can discuss the reform as early as July 5. The coalition has not yet spoken its final word either.
It is eagerly awaited whether new disputes will break out in the upcoming debates in the Bundestag on the draft bill. The FDP has recently shown itself to be no longer satisfied with the reform plans. It believes that the future contribution burden for today’s younger generation is too high. Heil responded that the predicted increase in contributions of half a percentage point each by 2040 for employers and employees is “something we can afford.”
And what do the Greens say?
They were unhappy with the generational capital. They had pointed out the volatility of the financial markets, which could lead to high losses in the short term. The Greens want to stipulate by law that the use of contributions for the capital stock will also be excluded in the future.
But when things got heated again between the SPD and FDP and pensions became the focus of attention, the Greens’ economics minister Robert Habeck was surprised. “The pension package was actually unified,” he said. His economics ministry had initially had a few problems with it, “because the debt-financed share pension did not convince us straight away.” But the result was something we could live with.
Who particularly likes the pension package?
Social associations and unions praise the security of the pension level – and demand even more. DGB board member Anja Piel told the dpa that a stable pension level means “relief, better security in old age and less expense for private pension provision”. Hans-Jürgen Urban from the IG Metall board told the dpa: “The pension package II stops the programmed devaluation of pensions for another 15 years.”
However, like the DGB and IG Metall, the social association VdK even demanded a higher pension level. VdK head Verena Bentele told the “Rheinische Post” that a level of 53 percent would be a pension increase of ten percent – “and would really help combat poverty in old age.”
Who has the biggest concerns about the reform?
Germany’s employers. The Confederation of German Employers’ Associations has been drumming up support for weeks against “the most expensive social law of this century,” as it called the pension package. “Since the coalition has already ruled out raising the retirement age, all the burdens of aging will in future be borne by the contributors.”
Employers’ President Rainer Dulger said: “Once again, benefits are being promised that will not be financially viable in the long term.” With ever-increasing social security contributions, Germany will find it even more difficult to emerge from the “economic standstill.”
Will the coalition respond to criticism with a third package?
Lindner and his FDP had called for something like this – for example to provide incentives for a longer working life. According to coalition circles, steps are currently being considered to make working in old age even more financially attractive. What is still pending is the announced better pension provision for the self-employed, which Heil again announced.
The coalition also wants to improve things in private pension provision. However, Heil denied the question of whether there would be more in terms of pensions after the pension package before the next federal election, beyond what was announced: “No, this is a major reform because we are keeping the pension level stable in the long term.” dpa
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