2024-02-04 00:13:50
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The pension package II is intended to secure pensions in the long term. But will that be enough to overcome the demographic challenges?
Berlin – The long-awaited adoption of the 2024 budget is finally imminent. The federal government can then deal with new issues once more. According to the wishes of Labor and Social Affairs Minister Hubertus Heil (SPD), the implementation of the pension package II should be part of this, as he recently stated in the Rhenish Post announced. “The draft law is available and should be implemented quickly following the budget resolution. We are stabilizing the pension and securing the pension level,” he told the newspaper.
The pension package, which has been promised for months, aims to secure pensions in the long term in view of demographic changes. But what does this actually mean for citizens? And are the plans of the traffic light coalition sufficient to overcome the challenges of statutory pensions?
Securing stock pensions and pension levels: This is the traffic light plan
The traffic light coalition plans to use the pension package to secure an existing holding line for the pension level of 48 percent in relation to wages in the long term. Simply put, this means that retirees should receive, on average, at least 48 percent of their previous wages as a pension. In practice it often looks different, but the pension level is an important key figure for determining the pension average. This so-called holding line currently applies to the security level of the statutory pension until 2025. The new pension package is intended to create a legal basis for the period following that.
The pension package also includes plans for a stock pension (generational capital), which is intended to help relieve the burden on pension insurance in the long term. It is planned to gradually build up a capital stock from public funds, the income from which will be used to stabilize pension contributions and the pension level.
Hubertus Heil (SPD), Federal Minister of Labor and Social Affairs, speaks at the regular federal party conference. © Kay Nietfeld/dpa
The stock pension is intended in particular to ensure that the contributions that all employees pay into pension insurance do not have to rise too quickly. Currently, employees and employers each pay 18.6 percent of gross wages into the pension fund. However, due to demographic change, more and more pensioners are faced with fewer and fewer contributors.
Financing your pension in the long term: These are the options
In order to ensure that the many pensioners can still receive an adequate pension, the financing of the pension fund must be reorganized. There are essentially the following options:
- Increase contributions: According to the pension insurance, the contribution rate would have to rise to 20 percent by 2030 at the latest if the pension level is to remain at 48 percent
- Increase federal subsidy: In 2024, the federal government plans to spend 126 billion euros on pension insurance. That corresponds to a share of 28 percent of the total budget – so a big chunk of money already goes into the pension fund every year
- Create other financing options: The traffic light coalition therefore wants to introduce share pensions in order to fill the pension fund; However, there is also often discussion regarding increasing the number of contributors, for example if self-employed people and civil servants would also pay into the statutory pension fund. However, this would mean a lengthy pension reform – and would be potentially unpopular.
With Pension Package II, the federal government intends to secure the pension level of 48 percent in the long term and at the same time delay an increase in contribution rates as much as possible. However, this will not be without problems as one will inevitably lead to the other.
Experts criticize traffic light plans: they are not enough
This is also criticized by experts. In particular, the so-called economic experts pointed out in their last report in the summer of 2023: “Specifying the level of security, as the federal government is currently planning, is not a sustainable solution, but rather increases the foreseeable increase in contribution rates. This exacerbates the distribution conflict between pension recipients and contributors.”
Pension expert Martin Werding is of the opinion that there must be “a combination of various individual measures” in order to financially secure pension insurance. He and his colleagues in the Federal Government’s Council of Experts are calling for the retirement age to be adjusted to life expectancy and the introduction of mandatory private pension provision. Through these two measures, “the level of security can be significantly increased in the long term and the risk of poverty in old age can be reduced,” according to the economists.
Economists have also criticized early retirement – “retirement at 63”. People who have paid into the pension fund for at least 45 years can retire two years before their regular retirement date – without any reduction in their statutory pension. Economists see this as sending the wrong signal, which will only put an unnecessary burden on the pension fund.
However, Minister Heil does not want to hear any of this criticism. “Anyone who has worked for 45 years has the right to retire earlier without deductions. “I won’t be able to retire at 70, as many conservatives want,” said Heil. The Union repeatedly called for the “pension at 63” to be abolished in view of the shortage of skilled workers and to be replaced by a better disability pension.
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