Berlin While the negotiations on the share pension are ongoing within the federal government, supporters and opponents of the reform project are now mobilizing. In addition to the Greens, the trade unions in particular are critical of the plans to build a funded pillar in the statutory pension system – they fear a dam bursting.
“If the generational capital is to be introduced as part of the agreement from the coalition agreement, that is nonsense, but relatively harmless nonsense,” Verdi boss Frank Werneke told the Handelsblatt. “However, my fear is that future governments could play the game further and then at some point contribution money would also end up in the funded pillar.”
With a one-off ten billion euros, however, that will not succeed, said Federal Finance Minister Christian Lindner (FDP) to the Handelsblatt. The FDP boss wants to expand the project. In his draft law, which he has now sent to the Federal Ministry of Labor, it is therefore planned that ten billion euros would be transferred to the Generations Capital Foundation every year. In addition, government property that is not required can be booked as a contribution in kind.
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“If we follow the suggestions and use interest and compound interest for a good 15 years, then the generational capital will have the necessary momentum,” emphasized Lindner. From the end of the 2030s, “a noticeable support of the pension system will be achieved”.
Ten billion euros stock pension? “Every collective bargaining agreement is more effective”
The officials of Federal Labor Minister Hubertus Heil (SPD) are currently working on a second pension package, which is to be passed by the Federal Cabinet in the first half of the year. In addition to building up the funded pillar, it provides for stabilization of the statutory pension level at 48 percent of the calculated average wage. Within the traffic light, there are currently reservations, especially among the Greens, about investing more than ten billion euros in so-called generational capital.
Union boss Werneke also knows that the ten billion euros alone will not be enough. “Every collective bargaining agreement that Verdi or other unions achieve is more effective, because the stability of pension finance depends on wages,” he said.
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However, Werneke is skeptical about the efforts of the liberals to endow the fund with larger sums. Because the finance minister would need 340 billion euros in capital to generate a return of 17 billion euros with a five percent return, he calculates. This sum roughly corresponds to one contribution rate point in the statutory pension insurance.
Returns of up to nine percent realistic?
Werneke also believes that Lindner expects a return of seven to nine percent: “You can only achieve that with high-risk equity investments.” should. The fund, which is endowed with a good 24 billion euros and is intended to finance the interim and final storage of nuclear waste, has achieved an annual average return of 8.6 percent since it was launched in mid-2017.
The Federal Minister of Finance wants to supplement the statutory pension with a funded component.
(Photo: IMAGO/Political Moments)
Many Greens and also parts of Werneke’s party, the SPD, still think it is wrong to expose the statutory pension to the capital market risk to a large extent, but know that the FDP will not let their campaign hit be taken away. The Liberals originally had more far-reaching ideas for a “stock pension”, into which parts of the statutory pension contributions were to be paid, based on the Scandinavian model.
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Instead of putting money into generational capital, Verdi boss Werneke proposes a reform of the pay-as-you-go pension. “We also have to talk about the income base, and in my view this also includes a debate about raising the contribution assessment ceiling.” That would mean an additional burden, especially for high earners.
Verdi boss rejects raising the retirement age
However, the trade unionist rejects a further increase in the retirement age. From his point of view, it would lead to “many employees inevitably going into retirement with reduced pensions”. Werneke points out that the current pension contribution, at 18.6 percent, is far from its historic high of more than 20 percent at the end of the 1990s.
He therefore considers a moderate increase of a few tenths of a point to cushion demographic-related burdens to be quite manageable. “We don’t have problems with the contribution burden in pension or unemployment insurance, but in health and care.”
In fact, health and long-term care insurance is also facing financial problems. Health Minister Karl Lauterbach (SPD) is working on reform proposals. “At the initiative of the Ministry of Finance, Mr Lauterbach is legally obliged to submit a proposal as to how statutory health insurance can be financed in a stable manner in the long term. I’ll wait and see,” said Lindner.
However, from the point of view of the Minister of Finance, pensions also remain a construction site. “In any case, the pension must be sustainably financed, also for the contributors,” emphasized the FDP leader. “One prerequisite for this is generational capital, which I am introducing as an additional capital market-based pillar of the statutory pension.”
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