Thursday, January 13, 2022
Plus, however, narrower than planned
Heil promises “strong” pension increases
The pensioners will get more money again from the summer after a zero round. Labor Minister Heil promises a significant pension increase. However, they will be a bit narrower than previously predicted – as a result of the pandemic.
Federal Labor Minister Hubertus Heil wants to soon set the course for the concrete structure of the pension increase in July. “According to all that we know, there will be a substantial increase in pensions this year,” said the SPD politician. In good time before the adjustment due on July 1st, he will reactivate the effect of the catch-up factor. With this already announced change in the calculation, the pension increase this year should be slightly smaller than originally forecast. The minister described the catching-up factor as compensation for “the fact that there was no pension cut in 2021 despite the Corona slump”. In fact, an existing pension guarantee had resulted in a zero round last year.
The pension development continues to follow the principle of the wage development, stressed Heil. “According to the current status, this should be an increase of over 4 percent this summer.” At the end of November, Heil had named 4.4 percent. According to his information at the time, 5.2 percent were originally forecast. The final amount of the adjustment for July 1st will not be known until spring.
Heil considers stable pensions to be achievable in the coming decades without escalating costs. “The decisive battle to stabilize pensions is taking place in the labor market,” he said. Germany’s employers sounded the alarm at the turn of the year and warned of increasing contributions or the need for further billions in taxes for the pension fund.
The Minister of Labor, on the other hand, emphasized: “The stabilization of the statutory pension from 2025, that is to say in the time when the baby boomers, the so-called baby boomers, are more likely to retire, will not be achieved through contributions and tax money alone.” Above all, it is necessary to have as many people of working age as possible in well-paid jobs.
The problem with the baby boomers
A look at the age structure of the population according to the data from the Federal Statistical Office clearly shows the problem: Today the strongest age groups are between the ages of 55 and 60 – and therefore often still in the middle of working life. When they retire, the structure is postponed. In 2035, the strongest age groups will be around 70 years old – and will then usually no longer be among the contributors to the pension fund, but rather among the recipients.
Employer President Rainer Dulger had therefore accused politicians of “failing to reform” and “flying completely blind”. The top business officials are particularly dissatisfied with the pension plans from the coalition agreement. Your calculation is: If the pension level is secured at 48 percent, as announced, and an increase in the age for retirement is to be dispensed with, higher contributions or more tax subsidies would inevitably result. More than 100 billion euros are already flowing into the pension fund from the federal government.
Heil promises “double strategy”
Heil defended the pension plans as a “double strategy”. “We are financially stabilizing old-age pensions, also by building up the capital stock.” The traffic light coalition wants to start building capital in the pension fund in the new year with initially ten billion euros. “And at the same time we will do our homework on the job market,” said Heil. Between 2025 and 2040, too, it should be fair between the generations and the pension system should remain stable. “We can do that – without horror scenarios and without ruining the statutory pension, as some ideologues have been trying for years.”
More people are paying into the pension fund: The pension fund has benefited in recent years from the increasing labor force participation, which Heil is counting on for the coming years. According to data from the pension insurance, the proportion of employees between 60 and 64 subject to compulsory insurance rose from 10 to 42 percent between 2000 and 2019. The number of insurance years rose within 20 years from an average of 27.7 to 36.3 years – also due to the higher participation of women. The number of foreigners in the German pension insurance rose sharply from 2.8 million in 2000 to 6.8 million in 2019. “These developments have led to increasing income in the pension insurance,” said a spokesman.