The share pension is intended to help stabilize state benefits. But there are some legal hurdles.
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Berlin Shortly before the expected presentation of the federal government’s second pension package, the Greens are again reporting doubts about the planned funded pillar – generational capital. According to the Green Party spokesman on pension policy, Markus Kurth, the previously known concept of the Ministry of Finance raises serious financial, state aid and constitutional issues.
“All in all, until these questions are answered satisfactorily, it is still unclear whether the project can be implemented in the currently known form,” explains Kurth.
With the second pension package, the traffic light coalition wants to not only stabilize the pension level at 48 percent but also build up the generational capital that the FDP initially brought into play under the term share pension.
According to the coalition agreement, a public body should invest ten billion euros in the capital market, for example in shares. From the middle of the next decade, the government wants to use the income to cushion the burden on pension funds from the retirement of the baby boomers.
As can be learned from government circles, the leading Labor Minister Hubertus Heil (SPD) and Finance Minister Christian Lindner (FDP) are largely in agreement – also that the capital stock should not remain at ten billion euros. But the Federal Ministry of Economics, led by Robert Habeck (Greens), still reports concerns.
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Even the party’s pension expert is not yet convinced. Kurth, a member of the Labor and Social Affairs Committee and the Budget Committee of the Bundestag, has commissioned an expert opinion from the Bundestag’s Scientific Service. And even if the experts formulate cautiously, constitutional concerns can be read from their report.
The federal government will initially take out the funds for the planned funded pillar as a loan in order to then pass them on to the foundation, which is to manage the generational capital as a legally independent special fund. Such special funds outside the federal budget are permitted, but only if their purpose is not primarily to circumvent the debt brake regulated in the constitution.
Just as the FDP imagines generational capital, the special fund does not fulfill its own material tasks such as a savings bank or a municipal housing association, but only serves to finance federal tasks, namely the stabilization of pension insurance. In addition, the federal government assumes liability for the capital stock. “This will probably break the ban on circumventing the debt brake,” says Kurth.
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Lawyers like Thomas Weck from the Frankfurt School of Finance & Management also express concerns about state aid. Because the planned sovereign wealth fund must be seen as a competitor, for example, by private pension providers who also operate on the capital market.
However, if the Generation Capital Foundation were to be invested in such a way that it had advantages over private actors, that would be illegal state aid. Finance Minister Lindner has already announced that the federal government should step in for the fund in the event of a loss or poor returns.
The foundation would also be given preference if it could take out loans from the federal government at interest rates that are below the usual market conditions for other providers. So there is a risk of collisions with EU state aid law.
In addition to the constitutional and state aid concerns, the Green politician Kurth also has financial questions. If the endowment capital is to be fully debt-financed, at least the interest costs would have to be earned through increases in the value of the portfolio and dividends in order not to make a nominal loss, he says.
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The money is only invested sensibly if, after deducting interest, a return above the rate of inflation is achieved. In order not to make a loss, the return must currently be above four percent. The Ministry of Finance even mentions a return of eight percent as a target if the generational capital is to make a significant contribution to stabilizing pension finances.
“An element of capital cover in the pay-as-you-go system would have to have a huge financial volume in the mid three-digit billion range in order to achieve any noticeable dampening effects on the contribution rate,” says Kurth. One contribution rate point corresponds to a good 17 billion euros annually.
Instead of building an additional funded pillar, the federal government should do everything possible to make the best possible use of the labor force potential and thus increase the contribution revenue for pension insurance, says the Greens pension expert. This can be achieved, for example, through age- and aging-appropriate working conditions with further training or more flexibility in working hours and the transition to retirement.
More: We do not need a stock pension, but a pension insurance that promotes public housing. A guest post.