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German MPs approve pension cut plan

GERMANY - The Bundestag, the lower chamber of the German federal government, has voted to back a new law which would allow the government to cut pensions rates by seven percentage points.

MPs voted 302 for the law and 291 against, with one absention.

According to the new 'sustainability' law, pensioners, now allowed to retire at 60 with 53% of salary, would see that rate cut to 46%. Chancellor Gerhard Scroeder had originally proposed cutting the rate to 43%.

The intended reform would also raise the pension age to 63 years after 2008.

On the government’s official web site, the law is presented as being important “to make the sustainability of pensions fit for the future”.

“To avoid social imbalance”, the site adds, it is necessary to plan ahead to 2020-2030. That is when it is estimated that employees and employers’ pension contributions, currently above 19% of wages, might exceed 22%, pushing up the cost of labour.

Announcements of the intended cuts, however, triggered protests from unions and disagreements in the coalition and in political arena in general.

Last month, Gudrun Schaich-Walch, of Schroeder’s own SPD party, stressed that pension reform was “not only about keeping contribution rates stable”.

“The actual level of pensions must be taken into consideration,” she told the German press.

At a hearing of the social committee of the Bundestag, unions, insurers and economists supported the introduction of measures to guarantee a minimum pension rate. Failure to do so, they warned, would make more and more pensioners eligible for social benefits.

The government’s answer was to introduce “Niveausicherungskalusel”, a clause to ensure that the level of pensions does not fall under 46%.

“In case the pension level up to 2020 falls short of 46%, the government has the duty to suggest law-makers take appropriate measures,” the government said on its web site.

The current debate does not involve the “minimum pension” - a sum guaranteed to every pensioner.

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