There should be no pension cuts, nor an increase in the entry age: With a new package, the traffic light wants to set the level at 48 percent of an average wage. A new financing pillar is planned for this.
It was announced for a long time, but now Federal Finance Minister Christian Lindner and Labor Minister Hubertus Heil have presented Pension Package II. The traffic light wants to guarantee a pension level of 48 percent of average wages by 2039 and slow down the growth in contributions. An additional source of funding is to be created.
The federal government will invest billions in the capital market and use the proceeds to pay subsidies to the pension insurance system from the mid-2030s, Heil and Lindner announced in a press conference. The so-called generation capital is to be added as a third pillar in addition to the payments from the contribution rates and the annual payments from the federal budget, which currently amount to 100 billion euros annually.
Heil: Securing the pension level is essential
It is already clear that contributions to pension insurance will increase in the medium term. However, they should remain at 18.6 percent until 2025. An increase to 22.3 percent is planned from 2035.
Heil sees pension security on the right track with the package. “There will be no reduction in pensions and no further increase in the statutory retirement age,” he said. Without government intervention, the pension level would fall below 48 percent of the average wage as early as 2026. Securing it is therefore essential.
In addition, the statutory pension is a generational contract that must be adhered to, emphasized Heil: “Anyone who pays contributions today must be able to rely on the statutory pension in the future.”
Lindner: “Use the opportunities of the capital market now”
Lindner explained that building up a capital stock of around 200 billion euros would buffer the increase in pension contributions expected due to the aging population. He spoke of a “real paradigm shift.”
The current guarantee for pension levels expires in 2025. The FDP has long been pushing for pension insurance to be supplemented with a funded component. However, Lindner avoided the controversial term stock pension. “For over a century, the capital market’s opportunities in statutory pension insurance have been left behind,” said the FDP leader. “Now we use them.”
Pension level – what is it?
The pension level is given in percent and describes the relationship between the standard pension (45 years of contributions with average income) and the average income of employees. The pension level is given as a net value. Net here means: minus social security contributions, but before taxes. The average income with which the pension is compared is the earned income minus contributions to health, nursing care, pension and unemployment insurance.
The pension level is currently 48.2 percent of average income. According to the pension insurance model calculations, it would fall below 48 percent from 2026 if it is not fixed by law. The reason for this is the aging of society: according to all forecasts, fewer contributors will have to pay for the retirement benefits of more pensioners in the future.
Heil and Lindner emphasized that it was not about gambling and short-term speculation. “This is money well spent in the long term,” said the Labor Minister. It’s not about investing citizens’ contributions in stocks, but rather just money from the state.
According to Heil, the bill will now be voted on within the government and then presented to the cabinet. The aim is therefore for the pension reform to be passed in the Bundestag by the summer.
Scholz: “Question of decency and respect”
Chancellor Olaf Scholz also spoke on the subject of pensions in a video message. In it he criticized proposals such as pension cuts and raising the retirement age. “For me, pension cuts are out of the question,” Scholz made clear.
The pension creates security that millions of employees have earned throughout their working lives, said the Chancellor. The federal government will therefore stabilize and guarantee the pension level in the long term. “For me, this is a question of decency and respect. Respect, by the way, not only for the current pensioners, but also for those who still have the majority of their working lives ahead of them,” said Scholz.