Berlin The federal government’s planned second pension package is taking shape. According to coalition circles, the pension level should initially be set by law at 48 percent by 2045. There are also differences about the structure of a funded pillar in the statutory pension insurance.
In the coalition agreement, the SPD, Greens and FDP had agreed to secure the minimum pension level of 48 percent “permanently”. This is an arithmetic variable: the pension level indicates what percentage of the current average wage a retiree receives as a pension who has always worked at the average wage and paid contributions for exactly 45 years. Under current law, it would drop to below 48 percent after 2025.
Exactly how it is to be fixed is unclear, even if Minister of Labor Hubertus Heil (SPD) is aiming for a cabinet decision on the pension package in the first half of the year. “The financing ideas are still missing,” says the labor market and social policy spokesman for the FDP parliamentary group, Pascal Kober.
Since the SPD does not want to be discussed about a further increase in the statutory retirement age, a stabilization of the pension level at 48 percent can only be achieved by increasing contributions or higher tax subsidies. The aim is now to cushion foreseeable increases in the contribution rate from the mid or late 2030s by at least 0.5 percentage points with the new funded pillar.
Whether this succeeds depends on the volume the column has reached by then. At the moment, there is still a struggle about “generational capital”, as Finance Minister Christian Lindner (FDP) now calls the project. Both the FDP and the SPD are aware that the ten billion euros agreed in the coalition agreement will not be sufficient to build up significant capital cover.
“Considerable friction” possible on the subject
Discussions are now apparently taking place in addition to contributing postal shares worth ten billion euros to the foundation for generational capital that is yet to be set up. FDP politician Kober says that his party will continue to campaign for another ten billion euros to flow into generational capital every year: “Minister of Labor Heil should not only make policy for those who are close to retirement, but also think about intergenerational justice.”
However, Kober also expects that the issue will lead to “considerable friction” because parts of the Greens continue to brace themselves “with tooth and nail” against generational capital. Their pension expert Markus Kurth is at least skeptical: “With rising interest rates, it will become increasingly difficult to generate the necessary interest rate differential for generational capital,” he says.
Kurth is thus alluding to the basic idea of Finance Minister Lindner: According to this, the state should borrow money on the capital market on favorable terms, invest it in shares and thus save capital to stabilize pension finances. In order for the calculation to add up, however, ever higher returns are required with rising interest costs. The European Central Bank (ECB) raised the key interest rate for the euro area by 0.5 points to three percent last week.
The SPD also draws a clear red line for the capital-covered pillar in the statutory pension insurance: “The FDP is trying to keep open that at some point contribution money can also flow in there,” says its social expert Martin Rosemann. “But neither the Greens nor we are involved in a reallocation of contribution funds to generational capital.” Both must remain cleanly separated.
>> Read here: Pension increase, catch-up factor, disability pensions: what the pension package I contained
During the election campaign, the Liberals had proposed a “share pension” based on the Scandinavian model, in which part of the contributions to the statutory pension insurance system should be invested in shares. When the Norwegian sovereign wealth fund reported a record loss of 152 billion euros at the end of January, Greens parliamentary group leader Andreas Audretsch tweeted that this was a “warning signal”. His party will not “endanger the pensions of millions of people in Germany through speculation on the stock market”.
SPD does not have high hopes for the reform
The Greens and the SPD want to be guaranteed that it is not at the expense of the insured if the foundation for generational capital does not bring the hoped-for return or even incurs losses. FDP boss Lindner has already made it clear that the state should step in with a higher federal subsidy in the event of losses.
Green parliamentary group leader Andreas Audretsch does not want to “endanger the pensions of millions of people through speculation on the stock market”.
(Photo: Reuters)
If capital cover, then the Greens would prefer to see them outside of the statutory pension insurance system – in a “citizens’ fund” they favor, which is intended to replace the Riester pension. The “Focus group for private old-age provision” is to provide ideas for the third pillar of old-age provision, which includes representatives from the finance, economics and labor ministries, as well as representatives from the insurance industry, social partners and consumer protection groups.
The group, which began its work on January 24, is to examine the possibility of a publicly managed fund for private provision, favored by the Greens, as well as the promotion of products with higher return opportunities than the current Riester pension.
>> Read here: Insurers want a fresh start – away from the unpopular Riester pension
In the SPD, however, no particularly high hopes are attached to a reform. “The third pillar serves more to secure the standard of living of middle to higher earners,” says social expert Rosemann. “I think the idea of being able to combat poverty in old age is absurd.”
His FDP colleague Kober still expects difficult negotiations, which will ultimately also affect the householders: the SPD wants money to stabilize the pension level, the FDP for generational capital and the Greens for their citizens’ fund. “It all has to be balanced.”
In addition, in addition to the pension, there is also a risk of higher costs in other branches of social insurance, such as health and care, and the SPD does not want financial gaps to be filled by the contributors alone.
According to coalition circles, the planned pension package could possibly be about very fundamental questions about the sustainability of the social systems in the early coordination, i.e. the first exchange between the federal ministries and the Federal Chancellery about a legislative project.
More: The chief economist: Lindner’s share pension plan hardly comes up against the expensive reforms for baby boomers.