Last year, the manager of Germany’s pay-as-you-go first-pillar scheme, Deutsche Rentenversicherung, recorded income of €363bn, the largest share coming from contributions (€275.6bn), and €87.4bn in public subsidies.
Total expenses amounted to €359bn, mostly for pension payouts (€322.7bn). Payments to the statutory pension pillar account for the largest share of expenses in the federal budget.
For employers and employees, the contribution rate is set to remain unchanged at 18.6%, which will help to stabilise the budget up to 2026. In 2027 the contribution rate will rise to 19.1%, according to the government’s financial plan.
The government has calculated contributions for people taking time out to care for children (Mütterrente), and disabled people among others, with subsidies amounting to €103bn in the 2027 budget.
Despite those numbers, and an ageing population, as the deadline for the draft law approaches, opposition has been growing to the governing coalition’s plan to build a reserve fund to invest in equities, and possibly also in real assets, to stabilise contributions and to reduce the flow of taxpayers money into the first pillar,
DGB, Germany’s trade union federation, which has 5.6 million members, social advocacy group VdK with 2.2 million, and the employers association BDA, have publicly criticised the government’s plan for different reasons.
In the governing coalition there is also discontent about the fact that the accumulated capital for the first-pillar equity fund will increase to €200bn over the next decade or so. The question is if the government, and specifically the liberal FDP party that first put forward the idea of the Aktientente, will overcome resistance to gain support for reform of the first pillar, rather than make it look like a unilateral, political act of a coalition in power.
Luigi Serenelli, DACH Correspondent
luigi.serenelli@ipe.com
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