The Social Democrats were very happy that something had finally been achieved for people with small pensions. The basic pension, said Labor Minister Hubertus Heil and SPD leader Saskia Esken in unison, was a “socio-political milestone.” That was 2020, both were still in the grand coalition under Chancellor Angela Merkel. “1.4 million people will be entitled to a basic pension in the future,” Esken announced at the time. In fact, the basic pension became a reality on January 1, 2021, after tough negotiations with the CDU and CSU. However, the results after three years are much more sobering than the term “socio-political milestone” suggests.
This is the result of a study by the German Institute for Economic Research (DIW), which… South German newspaper was available in advance. Accordingly, instead of 1.4 million people as Esken announced, only 1.1 million people received the basic pension. The federal government expected 1.3 million people to be eligible for the introduction. According to the DIW study, of the approximately 660,000 people who receive basic security in old age, i.e. who cannot secure their own livelihood but are dependent on state help, only around 31,000 people received a basic pension. “The basic pension helps, but it supports too few people. It is not enough to adequately combat poverty in old age,” says Peter Haan, head of the government department at DIW and professor at the Free University of Berlin. According to DIW, only 4.3 percent of the approximately 21 million pensioners receive the supplement.
The stated intention of the basic pension is to support people who have worked at low wages for a long time with a supplement to their pension. You are entitled to this from the age of 33, when you have paid contributions to the pension fund, raised children or looked after relatives; retirees from the age of 35 have the full entitlement. However, it is checked to what extent someone has other income, such as rental income and what a possible partner receives. If this income is too high, there is no basic pension. Recipients of disability and survivors’ pensions can also receive basic pensions.
On average, the basic pension gives you 86 euros more per month
According to the report, women and East Germans in particular benefit from the regulation. Around 72 percent of the recipients were women; they can claim child-rearing time and lower wages more often than men. In the East, 4.1 percent of men and 7.8 percent of women received the basic pension, in the West it was 1.8 (men) and 6.2 percent (women). On average, they received an increase in their monthly pension of 86 euros.
Without the income test, around 2.3 million people would have been entitled to a supplement. The Union had pushed for this restriction. When checking income, the German Pension Insurance (DRV) takes almost all income into account in an automated process. And that for millions of retirees. Hubertus Heil said in 2019 that they had “an unbureaucratic solution” was achieved in the negotiations with the CDU and CSU. In fact, the bureaucratic effort is high. DRV board member Anja Piel criticized last June that the administrative costs for the basic pension amounted to almost a fifth of the total expenditure of 1.3 billion euros.
DIW expert Haan calls for the basic pension to be expanded and simplified. “You could only check the income of potential recipients once and then only based on the reason, for example if a relative dies,” he says. It would also be worth considering lowering the minimum number of years for the basic pension. “It could be enough if someone can show 20 or 25 years of contributions and care time.” The basic pension could have a significantly greater impact on old-age poverty.