Economics demands reform
Schnitzer: “You can’t let pensions rise like before”
May 19, 2024, 11:19 a.m
The cabinet is still arguing about a planned pension package. The chairwoman of the Advisory Council insists on comprehensive reform. The increases should be limited, she says. In addition, the tax-free pension at 63 should be reserved for people with low incomes.
The head of “Wirtschaftsweise”, Monika Schnitzer, has called on politicians to reform pensions. “It would be important to reach a cross-party consensus on pension reform as a whole. That would be the order of the day,” she said. “We cannot afford to simply let pensions continue to rise as they have been.” Schnitzer was not specific about retirement at 63.
The FDP had called for the abolition of the zero-deduction pension at the age of 63 after 45 years of employment in order to save money. Work incentives for older people should be increased. The SPD rejects changes to the pension at 63. Against the background of a dispute over the 2025 federal budget, a planned pension reform has not yet been decided by the federal cabinet. The reform is intended to guarantee a 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.
Schnitzer said the level of retirement should not be lowered. “But the increases should be limited. At the moment, pension increases are linked to wage developments. Only very few countries do that.” Most countries focused on inflation developments. “In normal times, when inflation is not as high as wage developments, that would mean that you are less involved in economic development. But at least purchasing power is maintained.”
After baby boomers, fewer employees pay into pension funds
As the baby boomers retire, there are fewer employees who can pay the pension contributions, emphasized Schnitzer. “We have to adapt to that. The problem is that the baby boomers who were born in the 1950s and 1960s did not keep part of the generational contract. They paid for the pensioners with their contributions. But they did not have enough children raised in order to later have enough contributors for their own pension. We have to deal with that somehow.”
Ultimately, you have to save more for your pension, said Schnitzer. “It was already announced 20 years ago that the statutory pension alone would not be enough to maintain the standard of living. Unfortunately, not everyone really took that seriously.” There could be government subsidies to enable low-income earners to save for their pension.
Discount-free pension only for low earners
Schnitzer said about the pension at 63: “If you look at who takes advantage of it, then these are employees who earn average wages and are in above-average health. So it’s not the roofers who can no longer do it after a long working life, but people people who are healthy and could actually continue to work, people who earn average wages and can live well on their pension, especially if they retire without deductions.”
She continued: “If you wanted to make the measure more targeted and really take into account the fact that some people cannot work for so long, then you should reserve this tax-free pension for low earners,” said the chairwoman of the Advisory Council for the Assessment of Overall Economic Development Federal Government advisory committee. “That was our suggestion in the last annual report. These people are sick more often and live shorter lives than higher earners.”