After a long struggle, the government agreed to a second package of measures for the . This package of government in Germany provides for the stabilisation of the level of compulsory pensions and the creation of a capitalising pillar in the compulsory pension insurance system, according to Handelsblatt. Federal Labour Minister Hubertus Heil (PD) now sent a corresponding bill to the other ministries for approval. According to government circles, the level of pensions will continue to stabilise to 48% (p.p. salary replacement rate from pension) by 2039 , while the so-called ‘containment line’ will last enter into force when the pensions are adjusted in 2040. The federal government is changing for this purpose the so-called type of pension adjustment. The sustainability factor, which is used for the allocation of additional financial charges caused by demographic change between contributors and pensioners, will become inactive once the ‘line’ of 48% is reached (p.o. rate of salary replacement from the pension). This means that contributors and taxpayers will bear a greater burden than the generation of pensioners. Under the current legislation, the level of pensions will be reduced to 46.9% (p.p. salary replacement rate from pension) by 2030 and further to 45.4% by 2035. As a result, the German government expects a temporary significant increase in pension contributions from today’s 18.6%. The rate of contributions shall be limited to a maximum of 20% by 2025 from the ‘double line’ of the large coalition. Critics, such as the chairman of the Handelsblatt Research Institute (HRI) and former adviser to the German government on pension issues, Bert Rippurt (Bert Rürup), argue that stabilizing the level of pensions does not help to combat the poverty of the elderly promoted by the coalition government. The principle of equivalence does not change, i.e. the fact that the amount of the pension is measured on the basis of the contributions paid. Those who have paid many contributions during their working life also receive a high pension and vice versa. In addition to stabilising the institutionalized level of pensions, the bill regulates the creation of the so – called “generation capital. ” To this end, the German Government receives loans totalling EUR 12 billion this year. An institution based in the Nuclear Waste Management Fund (Kenfo) will invest the money in terms of return and create a capital reserve. Since the fund has experience in the creation and management of such assets, the German Government is using its expertise. Revenue from the fund is to help stabilise pension contributions from the mid-2030s. The impact on the rate of contributions is likely to be low, 0.3 percentage points. According to government sources, the plan provides for an increase in the fund’s assets to EUR 200 billion by 2035. The SPD and the Greens skeptically treated generation capital for a long time, according to Handelsblatt. Above all, they insisted that no contributions should be made to capital, as the FDP intended with its initial idea of capital pension. Labour Minister Heil had already assured in an interview last autumn that the government “will not invest a single cent of social security contributions in shares”. However, critics had also pointed out that the capital reserve would have to reach a very large size in order to enable investment income to alleviate the burden on contributors at all. In the first pension package, the federal government had already introduced improvements for pension beneficiaries of reduced income capacity in 2022 and restored the so-called replacement rate.
Germany: ‘Kumbara’ with capital investment revenue recommends federal government to support pensions
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