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German state pension "showing signs of strength"

GERMANY - Germany's state pension scheme is showing signs of renewed strength as the ‘so-called' sustainable reserve is almost three times the legal minimum and the scheme is expected to have a surplus for the full year, pension experts say.

The sustainable reserve, used to cover short-term deficits in the pension scheme, has swelled to €8.1bn - well above the legal minimum of €3.2bn.

Pensions experts are predicting the reserve may not even be needed in the future, as the scheme will end the year with a €300m surplus.

"The economic recovery and lower unemployment are having a positive impact on the scheme," said Dirk von der Heide, a spokesman for Deutsche Rentenversicherung, which administrates the scheme on behalf of the government.

Experts also said assuming current trends continue, the sustainable reserve could swell to €24.9bn by 2010, or 1.5 times the monthly sum the government pays out to Germany's 20m pensioners.

If that happens, the government would be in a position to lower the statutory contribution to the scheme to 19.1% from 19.9% now.

The government's last pensions report had envisaged a cut in the contribution in 2013 at the earliest and only to 19.7%.

The scheme's good financial shape contrasts with that of two years ago, when the evaporation of the sustainable reserve forced the government to provide a bailout of €500m. This money was garnered from other tax revenue.

To restore the scheme's financial health, the new government of Conservatives and Social Democrats decided in 2005 to bring up the statutory contribution - a key non-wage labour cost - to 19.9% from 2007.

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