Kai Whittaker, a member of parliament for the Christian Democratic Union (CDU) party, has proposed the state pays €4,000 for each newborn child into a sovereign fund to pay-out pension benefits at retirement age.
The sovereign fund can allocate pension capital to equities. “The money stays in the fund until retirement, only then it can be paid out,” Whittaker said in an interview with Der Spiegel.
Whittaker’s idea, dubbed Kinderrentengeld – child pension benefit – follows a similar proposal called Gesetzliche Aktienrente – or statutory equity pension – by the Free Democratic Party (FDP) based on the AP7 fund model in Sweden.
The child pension would cost the state around €3.2bn per year, taking into account that 800,000 children are currently born each year in Germany.
“It’s a comparatively convenient investment,” Whittaker said.
According to calculations, the state would pay from the age of retirement €900 per month per person of pension benefits, taking into account an average performance of 6% per year of the DAX index, including inflation.
“That [€900] is roughly the amount that prevents old-age poverty,” Whittaker said.
CDU’s committee for labour and social affairs, co-chaired by Whittaker and Barbara Klepsch, another CDU member, proposed last November a so-called double pension, a mix of the pay-as-you-go system and a ‘Rentenfonds’ for capital investments.
The government would be commissioned to design a proposal based on the idea of the double pension.
According to the proposal, a corporation under public law would be set up under the umbrella of the German Pension Insurance Fund (Rentenfonds K. ö. R.) to manage pension fund assets via a Rentenfonds.
The CDU has not yet revealed its electoral programme and it is not clear whether Whittaker’s proposals will be included.
According to local newspaper Bild, in its electoral programme the CDU plans pension cuts for those who retire early and incentives for those who stay in employment for a longer period of time.