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Warnings from economists Pension system on the brink of collapse?

Status: 21.06.2021 10:35 a.m.

Too few contributors and high household burdens – experts repeatedly point out the problems of statutory pension insurance. Does that inevitably lead to retirement at 68 or even 70? By Andreas Braun, tagesschau.de The criticism of the German pension insurance system, which has been publicly discussed for weeks, is sharp. The entire structure of the pay-as-you-go pension has been called into question by economists in recent weeks. Many of the criticisms have been known for a long time, but above all caused a stir Paper of the scientific advisory board at the Federal Ministry of Economics , an advisory body within the federal government. Economics Minister Peter Altmaier himself presented the committee’s proposals as “not binding” on his ministry The advisory board is “independent”.

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Pension and contribution guarantees aggravate the situation

With their description of the state of the German pension insurance system, the authors of the study are anything but alone among experts. You see “suddenly increasing financing problems” approaching the pension funds. These problems are mainly caused by the guarantee of the pension level introduced in 2018 at 48 percent of the average wage and the limitation of pension contributions to a maximum of 20 percent.

Together with the introduction of the “pension at 63”, this led to the deficit within the pension insurance system being further expanded. More than a quarter of the federal budget had to be diverted to the pension fund in 2019 to fill this gap. In 2040, almost half of the federal funds are threatened to be used for this.

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Increasing life expectancy

The conclusion of the economists of the advisory board with its chairman, the Munich economics professor Klaus M. Schmidt, reads: The coupling of the retirement age to life expectancy is “inevitable”. So if Germans tend to live longer and receive longer pensions, the start of retirement will have to be pushed back accordingly. This would correspond to a “pension at 68” in around 20 years.

In addition, the experts are calling for pension increases no longer to be carried out consistently in the future. While existing pensions should only increase with the development of purchasing power, a guarantee of 48 percent, for example, can still be guaranteed for “access pensions”, ie employees who are going into retirement.

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Criticism of “unsocial” proposals

While politicians from many parties immediately criticized the committee’s proposals as “anti-social” or unrealistic, the authors also received support from academia from other quarters. The researchers from the employer-related Institute of the German Economy (IW) also see a further extension of the working life as a sensible way to stabilize the German pension system.

IW study director Jochen Pimpertz sees this as an opportunity “to slow down the rise in premiums and at the same time to stabilize the security level”. He recommends raising the retirement age from 2031 by two months for each year of birth. In 2052, the standard retirement age would then be 70 years. The Freiburg economist Bernd Raffelhüschen also sees a dramatic need for reform in the pension system in Germany. The federal government can only choose between “plague and cholera,” he said in a recent interview. Either the contribution rates for the pension fund or the federal subsidy would have to be drastically increased. In the past few years, the federal government gave the “majority of the elderly” too generous gifts, he said.

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Statutory old-age provision How the pension is financed

It is and should remain the foundation of the old-age provision of millions of Germans: the statutory pension.

Swedish stock pension model

Martin Werding, professor at the Ruhr University in Bochum, is calling for a radical move away from today’s pure pay-as-you-go financing. Werding has calculated that a “share pension”, in which employees invest two percent of their gross income in an equity fund, could increase pension payments by up to 30 percent for average earners who have been insured for many years. The consumer advice centers also consider such a provision component, which is based, for example, on the Swedish pension model, to be sensible. Klaus Müller, member of the board of directors of the Federal Association of Consumer Organizations, sees the share investment as an opportunity to get “more money in old age” for insured persons.

But even a fundamental reform of the pension system is unlikely to close the gap between earned income and retirement income for many contributors. The Riester pension, which was introduced around 20 years ago , however, many experts are convinced that it is hardly suitable for this. There are increasing votes for Riester subsidies to expire under a new federal government in autumn. A prominent critic of the Riester model is, for example, the economist and former “economy” Bert Rürup. He advocates pension accounts that could be managed by a foundation and should be accessible to all citizens. Here, too, the idea is that additional contributions are invested primarily in the capital market and converted into payment plans in old age that supplement the statutory pension