Pensions will rise more strongly in the summer than forecast. The Labor Minister speaks of a “historic day”. In the future, pensioners will have to prepare for smaller increases.
Pensions in Germany are rising significantly this year: the more than 21 million pensioners in Germany will receive 4.57 percent higher salaries. On Wednesday, the Federal Cabinet passed a corresponding regulation from Federal Labor Minister Hubertus Heil (SPD). The most important questions and answers.
Is it an unusually large increase in pensions?
At least a stronger one than predicted last fall. At that time, estimates assumed an increase of around 3.5 percent in July. The main reasons for the significant increase are the stable labor market in Germany and good wage agreements. Wage increases of 4.72 percent were decisive for the pension adjustment. A pension of 1000 euros increases by 45.70 euros.
Will inflation eat up the pension increase again?
Not this year for the first time in years. The adjustment was “significantly below the rate of price increase,” said Heil happily. In March, consumer prices were 2.2 percent higher than in the same month last year. In the past two years, pension increases had lagged behind inflation; the previous year there had been a zero increase in the West and only a minimal increase in the East.
Why is the pension increase the same in East and West?
Heil spoke of a “historic day”: “After 34 years, unity has finally been achieved in the pension system in Germany.” In 2023, retirement benefits in the old federal states had increased by 4.39 percent and in the east by 5.86 percent. The pensions had already equalized last year. That was earlier than expected. Wages had previously risen significantly more in the East than in the West.
What are the prospects?
There are likely to be pension increases in the future – but according to the current pension insurance report, to a lesser extent. The report assumes an average increase rate of 2.6 percent per year until 2037 – a total of a good 43 percent. Without legal intervention, the transition of millions of so-called baby boomers into retirement would become increasingly noticeable. According to the report, the pension level is likely to fall from the current 48.2 percent to 45.0 percent in 2037 without reform. Pensions would then generally no longer rise as much as wages.
How does the coalition react?
With a legislative package. The plans have already been presented. Heil now announced that the reform should be approved by the federal cabinet in May. Then the parliamentary procedure follows. All generations should be able to rely on their pension. With their reform, Heil and Finance Minister Christian Lindner (FDP) want to guarantee the pension level of 48 percent for the future. The government also wants to invest at least 200 billion euros from federal funds in the capital market by the mid-2030s. Premium increases should be dampened from the income.
What will pension spending look like in the future?
According to the draft law, pension spending would rise from the current 372 to 755 billion euros by 2045 without reform – due to the 48 percent pension level, this should rise to 800 billion euros. Without investing money on the capital market, the pension contribution would rise from 18.6 percent to 22.7 percent by 2045. With generation capital it should then be 22.3 percent. Germany’s employers had already criticized: “The planned pension package II would be the most expensive social law of this century.” Contributors would be overwhelmed. It is also a mystery how the federal government wants to bear the growing financing burden for the federal subsidy.
How does Heil react to the criticism?
Security in old age for all generations must also be worth something to a society, he said on Monday. “And secondly, it can be achieved if we keep the labor market stable.” Today there are five million more employees subject to social security contributions than predicted ten years ago. The number of older employees between 60 and 64 and the participation of women in the workforce have also increased significantly. “We will also rely on these adjustment screws in the future and at the same time organize qualified immigration.”
Is everyone happy with the pension increase?
No. The Left’s pension expert, Matthias W. Birkwald, said: “In view of the past years of inflation, this increase is far from enough.” A pension level of 53 percent is necessary. The head of the German Social Association, Michaela Engelmeier, also said that the cost increases of the past months and years would not be compensated for for a long time. “Above all, the sharp increase in the cost of living represents a major burden. Many employees, civil servants and pensioners have therefore already received tax-free inflation compensation, but pensioners have not.” Engelmeier reiterated her demand for such an inflation bonus for these people too.
How are older women in Germany financially situated?
Usually worse than men. With gross annual incomes of an average of 18,663 euros, women aged 65 and over in 2023 were significantly behind men of the same age, who earned an average of 25,599 euros. The gender gap in retirement income, also known as the “Gender Pension Gap”, was 27.1 percent. This was announced by the Federal Statistical Office in Wiesbaden. Important reasons for the gap include the higher part-time rate among women, lower-paying jobs and more frequent time off, for example for childcare.
DRV Bund Press Government on Pension Pension Insurance Report 2023
Source: Stern
I have been working in the news industry for over 6 years, first as a reporter and now as an editor. I have covered politics extensively, and my work has appeared in major newspapers and online news outlets around the world. In addition to my writing, I also contribute regularly to 24 Hours World.
