Retirement baby boomers are putting social security funds under pressure. The traffic light coalition wants to break new ground with its next pension reform. The responsible minister does not want to change the retirement age.
Federal Minister of Labor Hubertus Heil (SPD) is now also relying on the capital market for long-term protection of pensions in Germany. Before the eagerly awaited presentation of his second pension package, Heil told the German Press Agency in Berlin: “In order to make long-term provisions, we are creating generational capital in the form of a share reserve for the statutory pension insurance.”
With the share reserve, the traffic light coalition wants to break new ground in the history of the Federal Republic. So far, the pension has only been financed by contributions and taxes. The FDP had already promoted a stock pension before the 2021 federal election, with part of the pension contributions going directly to a fund. In the coalition agreement, the SPD, Greens and FDP then announced a capital stock of initially 10 billion euros. Heil emphasized: “It is important that the money is invested well, securely and for the long term.”
the Social Association Germany (SoVD) expressed fundamental criticism. The CEO Michaela Engelmeier told the newspapers of the Funke media group: “The SoVD is convinced that no good pension policy can be made on the stock market! People need security for their old-age provision. The pay-as-you-go system of the statutory pension insurance is the best option for this.
Minister Heil confirmed that a pension package II will be launched in the next few weeks and that the level of pensions will be permanently secured. The pension level describes the security power of pensions in relation to wages and is currently 48.1 percent. Last year, the coalition passed its first pension reform, which, among other things, improved the situation for people with reduced earning capacity. According to Heil, it is now a question of “stabilizing the statutory pension (…) in the long term”.
Pre-retirement baby boomers
The problem that the traffic light alliance wants to tackle: From 2025, the baby boomers will gradually retire. Fewer depositors then come to more pension recipients – had pension cuts SPDGreens and FDP excluded.
Against this background, Heil supports a possible further expansion of the planned capital reserve, as he made clear. “This is money well spent in the long term to support the contribution in the thirties,” said Heil. The income from the securities should strengthen the pension from the mid-2030s.
Federal Finance Minister Christian Lindner (FDP) admitted in an interview in December that a three-digit billion sum would be needed for financial investments in the long term, so that the earnings could be used to stabilize pension contributions and the level. There are already ideas for financing such high sums, Lindner said at the time, without being specific. This Friday, Lindner wants to in Berlin comment on the topic.
No contribution limit
A new stop line for pension contributions is not under discussion. Such an upper limit of a maximum of 20 percent for the contribution rate will apply until 2025. “If the pension contribution rate increases, the federal subsidy also increases automatically,” said Heil.
He pointed out that the contribution rate has been stable at 18.6 percent since 2018. “The contribution rate will also remain stable longer than some scientists have predicted,” he said. Heil referred to the bubbling contribution income from record employment. “Today we have five million more employees subject to social security contributions than ten years ago.” For stable pensions, further successes on the labor market are necessary – for example in securing skilled workers, employing women and more qualified immigration.
Three sources of pension
In the future, the statutory pension will be financed “from three sources”, according to the Labor Minister. In the long term, the income from “generational capital” would be added to the contributions and the tax subsidy. “These are the three pillars for a modern and stable statutory pension.”
Heil had already described the demographic challenges as “huge” in December. Employers and trade unions were alarmed at the turn of the year. Employer President Rainer Dulger referred to the more than 100 billion euros that the federal government already transfers to the pension fund every year. The pension will become “a brake on our nation’s economic future,” warned Dulger. Verdi, on the other hand, had insisted on significantly more tax revenue for pensions in order to avoid contribution jumps.
Retirement at 67 remains
Heil smashed employer demands to link the retirement age to increasing life expectancy. “The statutory retirement age has increased significantly in the past,” he said. “An increase beyond the age of 67 would be alien to life and would mean a de facto reduction in pensions for many people who can no longer work at this age.”
However, Heil spoke out in favor of bringing the actual retirement age of around 64 statistically closer to the statutory one. Chancellor Olaf Scholz (SPD) had already said in December: “It is important to increase the proportion of those who can really work until retirement age.”
appeal to employers
Heil explained that the proportion of people between the ages of 60 and 64 in employment has risen from around 20 percent in 2000 to 61 percent today. “So we’re on the right track. If we manage to bring this rate to 70 percent, then that would mean 700,000 more professionals and thus more contributors,” said Heil. More health protection is needed. “We have far too many people who get sick in the workplace and therefore have to retire early.”
Heil called on companies to give older workers opportunities. “To do this, we need the willingness of companies to hire employees over 60 who have become unemployed.” Heil rejected the possibility of a pension without deductions after 45 years of insurance.