The election promises of the parties regarding the pension do not reveal how they intend to finance them, according to an analysis by the Ifo Institute, which refers to the programs of the SPD, CDU/CSU, Greens, and AfD.
“All the larger parties are clearly trying to avoid any burdens for retirees and instead shift the load to the current and future contributors” said Joachim Ragnitz, deputy head of the Ifo Dresden branch.
The SPD’s election program envisions a permanent pension level of 48 percent, without extending the working life. “The proposal would shift the costs of aging solely to the working generation, which would have to bear this through higher contributions or taxes” said Marcel Thum, head of the Ifo Dresden branch. According to this, the contribution rate would rise by 1.5 percentage points to 22.7 percent by 2045.
The Greens also advocate for a stable pension level and against a higher retirement age of 67 years or more. Additionally, they propose that civil servants and self-employed individuals should contribute to the pension in the future, as well as the introduction of a capital-deployed provident fund in the form of a “citizen’s fund.” However, it remains unclear how the short-term financing of the pensions can be secured. “In particular, an expansion of the pension insurance obligation to civil servants would lead to a double burden on public finances, which would then have to bear both the ongoing pension payments and the contributions for the active personnel” said Ragnitz.
The CDU/CSU stick to their “pension at 63” and the retirement age of 67 years from 2031, with the pension level and contribution rate to be stabilized through economic growth. “Through general productivity and wage increases, contributions do rise, but ultimately so does the pension value and thus the expenses. You cannot simply grow out of the financing problem of the German pension insurance” said Thum. The further proposals for strengthening of occupational and private provident funds, as well as a capital stock from state funds for children, would only relieve the pension funds as of 2070.
The AfD’s election program aims at a medium-term increase of the pension level to around 70 percent of the last net income. This is to be financed through an increase in the tax-financed federal subsidy to the pension insurance. Politicians are to contribute to the statutory pension in the future as well. Contribution rate increases are to be offset by tax reliefs. The proposals would lead to a reorientation of the financing of the pension and even exacerbate the financing problem through the pension increase, according to the Ifo researchers. The effect of including politicians in the pension insurance is, in addition, negligible.
The FDP has so far kept its concrete proposals and promises regarding the pension back, so this was not included in the analysis, it was said. No information was given on the concepts of the Left and the BSW by the researchers.
As a long-term effective way to stabilize the statutory pension insurance, the authors suggest adjusting the retirement age to the life expectancy. This would allow the ratio of contributors to pension recipients to be maintained nearly stable in the face of the demographic imbalance. Additionally, the authors recommend that pensions be adjusted to the inflation rate in the future, rather than to the growth rate of net wages. “Both the coupling of the retirement age to the life expectancy and the inflation-indexing of the pensions are regulations that have already been successfully introduced in other European countries. In Germany, currently no major party dares to approach such a reform” said Thum.
In the year 2023, the total costs of the old-age insurance were 429 billion euros and thus around 10 percent of the gross domestic product. By the year 2038, the expenses for the statutory pension insurance would increase by more than 75 percent compared to the current value, while the contribution-based income would only rise by 50 percent, according to the institute.