The SPD, FDP and the Greens agree: They want coalition negotiations, a traffic light coalition should come. One topic plays an important role there: securing a pension.
The promises of the parties for the pension were great: SPD chancellor candidate Olaf Scholz, for example, issued a pension guarantee, the Greens wanted to turn the basic pension into a guaranteed pension – and the FDP would have preferred to break open the statutory pension and put it partly on a share structure.
Now the parties have come together, they want to forge a traffic light coalition. In the exploratory paper For the first time, they wrote down more or less specific ideas on how they want to secure retirement provision.
We remember: The statutory pension is facing a financing problem because there are fewer and fewer contributors for more and more pensioners – and society is getting older and older.
The plans for securing pensions can be found in the chapter entitled “Make social security citizen-friendly”. Specifically, the parties want five points for the pension:
- Secure pension level at 48 percent
- No increase in the statutory retirement age
- Capital cover with statutory pension insurance
- Higher labor force participation
- Reform of private pensions
What does it mean exactly? The individual plans at a glance:
1. Pension level
The so-called pension level is to be secured at 48 percent. The pension level is a theoretical parameter that is repeatedly referred to in political discussions.
Incidentally, if the pension level falls, that does not mean that the pension paid out individually will fall. It just means that pensions are growing more slowly than earnings overall. More on this read here.
The pension level is currently set at 48 percent through a holding line until 2025. As the parties write, this commitment is to be safeguarded “in line with the generations” – that is, the holding line should apply beyond 2025. This is to be financed through a capital base in the statutory pension (see below).
2. Retirement age
The same as for the pension level applies to the retirement age. Basically, the retirement age is also fixed until 2031. Because the age limit after which you can retire without deductions is 67 years for all cohorts from 1964 onwards. In other words: Anyone born in 1964 can retire in 2031 – without any deductions. More on this read here. According to the plans of the parties, it should stay that way for the time being.
Economists, on the other hand, call for the retirement age to be kept flexible – that is, to continue to be linked to life expectancy. In an interview with t-online, pension expert Alex Börsch-Supan said in mid-September: “You must not decouple life expectancy and retirement age.”
And further: “If we live longer, we have to finance ever longer retirement periods. So that means: we also have to work longer.” But the exploratory partners do not want that.
3. Capital cover in the pension insurance
In order to finance the stable pension level and the retirement age, the parties want to put the statutory pension insurance partly on a capital base. In plain language this means: The pension insurance should leave the completely pay-as-you-go system and, on the other hand, be allowed to invest part of the reserves on the capital market. In the first step, the pension insurance is to receive ten billion euros from the federal government, which will then be invested in the capital market.
The parties do not want to introduce a share pension, as the FDP had planned. Accordingly, a fixed component of the pension contributions, for example two percent, would flow to a state-administered fund. The exploratory partners still want to break open the first pillar, the pay-as-you-go pension system. That would be tantamount to a revolution.
Johannes Geyer, pension expert at the German Institute for Economic Research (DIW), thinks the idea is basically a good one. “It makes sense to make the investment rules for the reserves of the pension insurance more flexible,” he tells t-online, “but the idea comes too late. The reserves of around 30 billion euros will soon be used up and the reserves will then be much lower.”
For effective stabilization over a longer period of time, three-digit billions would be needed. “But it is too late for that now, because the pressure to spend will increase significantly in the coming years.” Geyer also considers the ten billion euros with which a capital cover is to be built up to be “far too little”.
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4. Higher labor force participation
The SPD, FDP and the Greens want to increase the labor force participation, in plain language: More women should go to work, older people should also work longer and the FDP, SPD and Greens want to promote qualified immigration.
How exactly this should happen in each case is left open. For example, there could be financial incentives for people who go to work beyond retirement age. So far, however, the plans are still very vague.
What the parties apparently could not agree on is to include civil servants or self-employed persons in the statutory pension. That demanded the SPD and the Greens – and thus could not prevail.
5. Reform of private pension schemes
Private pension provision is to be fundamentally reformed. To this end, the parties want to examine a public fund with a low-cost offer. They also want to examine the extent to which private investment products with higher returns than the Riester pension can be recognized for state funding. It is said that this should offer an incentive, especially for lower income groups.
The ideas sounded fundamentally sensible, according to pension expert Geyer, but: “When it comes to private old-age provision, the parties are still very vague.” Just by examining a fund for old-age provision, it will not yet exist. “I expect this to be much more specific in a coalition agreement,” says Geyer.
What is left open?
Some things, such as the discussion about the so-called catch-up factor, do not play a role in the exploratory paper. What it is and why it is currently exposed read here.
Also questions about the basic pension, the Maternal pension or other projects of the grand coalition that are controversial among economists are not found in the exploratory paper. One of the criticisms of the basic pension is that it is not targeted enough.
That means: pensioners who actually don’t need them get the basic pension. Conversely, needy seniors go away empty-handed. It is questionable, however, whether the SPD would help turn back such projects or at least reform them.
Expert: “I would have liked more ambitions”
Above all, however, the following applies: “The parties are evading the major structural problems of pensions and postponing decisions into the future,” said pension expert Geyer. “I would have liked more ambitions here.” Because the long-term financing of the pension is not yet secured, if you look at the exploratory paper.
It is therefore clear: “The pension contributions will – probably from 2023 – increase and the level will fall in the long term, but only after 2025 below 48 percent.”
Employer President Rainer Dulger sees it similarly, he told the newspapers of the Funke media group: “The result of the exploration gives no answers to the aging of society and the increasing financial burdens of the pension insurance.” He warned that without reforms to social security there would be four more years of stagnation.