Dhe departure from demographic burden sharing in pensions planned by the SPD and the Greens will drive up their contribution rate sharply in the long term: In 2070, employees and employers would have to pay 29 percent of gross wages to the pension fund. In addition, the subsidies from the federal budget would have to increase to an extent that corresponds to a 6 percentage point increase in VAT. This is shown by calculations by the Bundesbank in its new monthly report. If you stick with the current pension law, the contribution rate will rise to 25 percent by 2070, and VAT would also have to rise by 4 points.
The core of the study is the question of what the stipulation of a “minimum pension level of 48 percent” planned by the SPD and the Greens in the traffic light alliance means for pension finances. It amounts to legislating that pensions must always rise at least as much as wages during rounds of increases. There is no other way of guaranteeing that the pension level indicator will remain at its current level of 48 percent.
What will become of the sustainability factor?
So far, the burden has been shared between the generations: if the contributors have to pay for a sharply increasing number of pensioners, as will happen when the baby boomers retire, then the pensions will rise somewhat more slowly because the so-called sustainability factor dampens the increase. It does not prevent pension increases, but ensures that they lag slightly behind wage increases; this should take into account that the payers will then have to use increasing parts of their wage increases for higher contributions and taxes anyway. Technically speaking, the sustainability factor ensures that the pension level indicator falls.
The Bundesbank has now alternatively calculated a mixed model that the Scientific Advisory Board at the Federal Ministry of Economics has already put up for debate: This would continue to calculate the amount of the individual pension upon retirement according to the duration and amount of the contribution payment during working life. But then, with the annual rounds of increases, there would always be inflation compensation.
According to the analysis, the contribution rate would have to rise to 26.5 percent by 2070, and a 5 percentage point increase in VAT would also be necessary. So this would be somewhat easier to finance than the end of the equalization of burdens, but still more expensive than the current law. Because the latter not only dampens the increase in pensions in the retirement phase, but also the increase in the starting level for future new pensioners.
The coalition agreement does not contain a clear statement to delete the sustainability factor. The plans of Social Affairs Minister Hubertus Heil (SPD) amount to that. From a purely technical point of view, the decline in the pension level indicator could also be slowed down by further increases in the retirement age. However, the coalition agreement explicitly excludes this. The Bundesbank concludes, however, “that the pressure on pension finances will ease noticeably if the retirement age continues to increase gradually after 2031”.
