Germany’s first pillar manager Deutsche Rentenverischerung and the employers association BDA have criticised the first pension plans laid out by a possible grand coalition – the Union, the alliance of Christian Democratic Union (CDU), and Christian Social Union (CSU), and Social Democratic Party (SPD) – hoping for a turning point in pension policies in the next legislative period.
Gundula Rossbach, DRV’s president, said the Union and SPD’s plan leaves open questions on a balance between contributions, that could increase, and the level of pensions.
Discussions should revolve around the contribution rate and the level of pension, because after 2030 there isn’t a “guiding light” on it, she added.
The contribution rate will increase from 2026 to 21.4% by 2040, from the current 18.6%, while the level of pension will decrease from 48% today to 45% in 2040, according to Rossbach´s presentation during this week’s Zukunftsmarkt AltersVorsorge conference in Berlin.
Moreover, from 2025, first pillar reserve funds (Nachhaltigkeitsrücklage) will reach the lower limit, meaning contribution rates must increase to finance pension payouts, according to Rossbach.
An expansion of the mothers’ pension (Mütterrente) is a short-term measure that costs money, about €5bn, which is equivalent to 0.25 percentage points in terms of contribution rate, Rossbach said.
The first pillar needs a reliable funding commitment from the state that was missing at times in the past legislative period, as money was taken from the pay-as-you-go system because reserves were high, she added.
In a document drafted after the first phase of negotiations to form a governing coalition, the Union and SPD agreed on securing a certain, not specified, level of pension through economy and wage growth, and high employment rate, to introduce incentives for savers choosing to work longer through the Aktivrente (active pension), expand mothers’ pensions, and on a mandatory membership in the first pillar for self-employed.
Earlier this week, the Union and SPD started a second phase of negotiations to draft a programme and form a government.
An opting-out clause for self-employed in the first pillar will turn out to be a “bureaucratic monster”, Rossbach said.
Alexander Gunkel, alternating member of the executive board of the Deutsche Rentenversicherng representing the employers, and executive board member of the BDA, agreed that the mothers’ pension is the most expensive measure agreed by the Union and SPD.
The contribution rate will likely increase to over 20% by the end of the next legislative period if the measures agreed by the Union and SPD will be implemented, according to Gunkel’s presentation at the event.
BDA is calling for an increase to the statutory retirement age after 2031, a reform of survivors’ pensions that “does not fit in today’s world”, and for benefits not to be increased, Gunkel said.
The association also believes in an urgent more comprehensive second pillar pension system reform because the changes planned so far represent only a small step forward to expand occupational pensions among employees.
The Union and SPD have vaguely agreed to strengthen occupational pensions and reform private pensions.
“The key is that we get up and running the social partner model [with defined contribution plans],” Gunkel said during the event.
Collective bargaining agreements must be implemented if the employers and occupational pension funds agree to offer DC plans, without waiting for unions to back the social partner model in their industries, he added.
Insurance association GDV has called for the introduction of auto-enrolment and for improvement to support for low-earners in occupational pensions.
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