background
The increase in the retirement age caused protests in France. When the CDU recently shook up the “retirement at 63” policy in Germany, criticism rained down. The topic polarizes – how does the traffic light want to regulate the pension?
In France, the government’s pension reform has been the subject of criticism and protests for weeks. The focus is on raising the retirement age from 62 to 64 years. For comparison: In Germany, the “retirement at 67” was already decided in 2007 during the time of the grand coalition – with a gradual postponement of retirement, which will take full effect from 2031. Then for all vintages from 1964.
Contribution rate stable – for now
This reform, together with minor changes to the pension formula, has stabilized the situation of statutory pension insurance in Germany. A second factor that is why things are currently going well with pension insurance is the labor market. The number of employees subject to social security contributions is higher than ever before in the history of the Federal Republic. Federal Minister of Labor Hubertus Heil also emphasizes this. According to the SPD politician, the contribution rate for the statutory pension insurance can remain stable at 18.6 percent until 2026. By 2030, the contribution rate could then rise to 20.2 percent. That’s what the federal government’s pension report says.
But there is another factor for the stability of pension contributions – a factor that is not as positive as the development on the labor market: the increasing subsidies from the federal budget. This year, the federal government has to inject around 112 billion euros. Also because politicians have decided in recent years to provide additional benefits such as “retirement at 63”.
Constantly increasing subsidy from the federal budget
The problem: the ever-increasing pension subsidy limits the scope for political action in the future. Against this background, Florian Neumeier, a financial expert at the Munich Ifo Institute, calls for the federal subsidy to at least be stabilized “or, ideally, reduced”. Otherwise too much tax revenue would simply be tied up that is not available for other tasks.
Neumeier is not the only economist who sees a problem in the constantly increasing federal grants. The Bundesbank has also repeatedly warned of financial difficulties if the federal government does not take countermeasures. In 2021, the Scientific Advisory Board at the Federal Ministry of Economics even spoke of “shock increasing financing problems in the statutory pension insurance from 2025”. The advisory body therefore called for a further gradual increase in the retirement age, linked to the development of life expectancy – which immediately caused outrage among politicians and trade unions.
Most recently, however, Federal Minister of Labor Heil also admitted: “The changed age structure presents us with challenges.” On the one hand, the so-called baby boomers, i.e. those born up to 1964 with a particularly large number of births, will retire in the coming years. On the other hand, life expectancy has increased over the years. The bottom line is that fewer contributors have to pay for more pensioners.
The share pension is intended to pension insurance stabilize
The federal government wants to react to the problem by broadening the basis for financing the statutory pension insurance. The FDP introduced the idea of a share pension in the traffic light coalition agreement – a model that has since been given the name “generational capital”. According to FDP leader and Federal Finance Minister Christian Lindner, the idea is to enshrine in law a foundation “that can act independently of politics and invest capital on behalf of all of us.”
According to Lindner, tens of billions of euros should be financed annually through the federal budget. An amount of initially ten billion euros is under discussion, for which, however, debt must be taken up. Lindner’s calculation: The federal government can take out loans at very low interest rates and then invest the money on better terms, including on the stock market. There are role models for this in Scandinavia.
Take long-term precautions instead of short-term thinking
Ten billion euros is not much in itself. If you put them straight into the pension insurance, they would only last for a good ten days. However, the capital stock itself should not be touched at all. Instead, money should be paid into the generation capital fund for at least 15 years. Towards the end of the 2030s, income from the fund could flow into the pensions due at that time – and thus help to stabilize pension contributions or the federal subsidy. “That sounds far away,” admits Lindner’s cabinet colleague Heil. But it is important not to think in the short term when it comes to pension policy, but to make long-term provisions for the future.
The concept is still in the works, together with a pension package with which the government wants to ensure that the pension level does not fall below the 48 percent mark in the long term: “After many years of work, people must be able to rely on an appropriate income in old age”, according to the Federal Ministry of Labour. The talks for the new “Pension Package II” would take some time. The corresponding law should be passed before the end of this year.
How can older people be kept in the job longer?
One thing is clear: an increase in the retirement age will not be part of the law, nor will the waiver of “pension at 63”, as recently demanded by CDU parliamentary group leader Jens Spahn. The background to this discussion is not so much the burden on pension insurance as the question of whether too many people are being lost from the labor market in a time of labor shortages due to the deduction-free pension for long-term insured persons.
A debate that was indirectly fueled by Chancellor Olaf Scholz a few months ago. The SPD politician had said that in view of the lack of workers, the proportion of those “who can really work until retirement age” must increase. Other Social Democrats, such as party leader Saskia Esken, immediately emphasized that this should not be taken as a rejection of “retirement at 63”. Rather, it is a matter of designing working conditions in such a way that older people also have the opportunity to work longer.
In addition, the traffic light partners have spoken out in their coalition agreement for a certain degree of flexibility in the retirement age: they want to examine how wishes for a longer stay in working life can be realized more easily. However, more details have not yet been determined.