Deutsche Rentenversicherung (DRV), the administrator of Germany’s state pension scheme, has remained confident for the fund’s future performance despite uncertainties caused by the COVID-19 pandemic.
DRV has a sufficiently large buffer to cover pension payments in any case, a spokesperson said, adding that it expects financial reserves to increase to around €38bn at the end of 2020.
Financial reserves decreased in the first five months of 2020, from €40.4bn in January to €36.9bn in May, but it recorded an uptick to €37.2bn in June.
Liquidity declined this year from €42.6bn in January to €39.1bn in May, but shot up again in June to €39.4bn, according to the latest figures published by DRV.
The coronavirus pandemic had only a limited impact on the statutory pension scheme, according to DVR. Employees that received benefits during short-time work, and unemployment benefit contributions, Arbeitslosengeld I, continued to pay into the statutory pension scheme.
In addition, employers are paying additional contributions based on 80% of earnings lost due to short-time work.
The reserve at Deutsche Rentenversicherung should be gradually reduced to keep contribution rates stable during a phase of demographic changes, the spokesperson added.
Reserves are primarily used for cushioning fluctuations during the year, particularly of income from contributions.
The statutory pension scheme started 2020 in good financial shape, said Bund Alexander Gunkel, the chair of DRV’s federal board, at the institution’s general assembly in June.
At the time, Gunkel said the DRV estimated a deficit of around €4.3bn and reserves to significantly decrease by the end of 2020 to €36.5bn.
According to financial forecasts before the pandemic, the contribution rate to pension insurance contracts was expected to be stable until 2024.
However, the economic consequences of the coronavirus pandemic have shown that reserves reduced at a faster rate than expected, Gunkel added.
According to forecasts, the contribution rate will remain constant at 20.6% in 2021, up until 2024 in order to potentially reach 20% by 2025, he added.