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German MPs call for civil service pension fund

The budget committee of Germany’s parliament (Bundestag) has urged the government to create a pension fund for federal civil servants instead of financing their pensions via tax reserves as happens now.
The government spends €8.5bn a year on pensions for federal civil servants, including judges and military personnel.
To reduce this expenditure, budget committee MPs suggest that the government set up a pension fund from January 2007 that all new civil servants would contribute to.
There is a good chance that the government will heed the suggestion as the MPs are members of the governing centre-right CDU/CSU and centre-left SPD parties.
In 1996, the government of Rhineland-Palatinate set up a pension fund for that state’s civil servants.
Separately, the Bundestag – where the CDU/CSU and SPD have a super-majority – approved a draft law that bars cuts in the state pension benefit until at least 2009. The measure will now take effect.
However, the benefit, currently drawn by 20m people, is also not to rise before 2009. In addition, the statutory contribution to the state pension scheme – split between employers and employees – is to rise to 19.9% from 2007 against 19.5% now.
Prior to the Bundestag vote, German pensions minister Franz Müntefering summed up progress since the Riester reforms of 2001 which boosted corporate and private pensions.
He said 15.7m employees now had access to some sort of corporate pension, while 5.7m people had signed up for the ‘Riester-Rente’, the tax-privileged private pensions.

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