Ensuring the financial viability of pension insurance in the long term
Statutory pension insurance is generally much better prepared today for the expected demographic changes than it was in the past. Nevertheless, there is still a need for action: We need adjustments to our old-age pension systems so that the statutory pension insurance system actually remains efficient and financially viable in the long term and additional old-age provision can fulfill its task of compensating for the necessary fall in pension levels in a reasonable manner.
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The demographic challenge is huge:
Our society is ageing: life expectancy is increasing and the number of older people is growing. At the same time, far fewer children are being born than in the past. While today there are around 30 people over the age of 67 for every 100 people aged between 20 and 67, by 2040 there will be around 50. The pressure on the pay-as-you-go statutory pension scheme is increasing as a result of this ageing. Without reforms, it will not be financially viable in the long term.
Extending working life should no longer be taboo in the political debate:
The legislator's decision to gradually raise the statutory retirement age from 65 to 67 by 2029 as a result of the "Pension Age Limit Adjustment Act" was correct and necessary. Raising the statutory retirement age helps to limit the decline in the potential workforce and prevents the significant increase in life expectancy from being borne exclusively by those paying contributions. If, fortunately, life expectancy continues to rise, the retirement age will also have to rise in the long term. This is the only way to ensure that the costs of an ageing society are distributed fairly between the generations.
Keep total social security contribution below 40 %:
The primary objective must be to ensure that the contribution rate to the statutory pension insurance scheme does not exceed 20% and total social security contributions do not exceed 40% of wages subject to social security contributions in the long term. Structural reforms in the statutory pension insurance system are therefore essential, as the pension insurance contribution alone will rise from 18.6% today to almost 20% in 2025 due to demographic trends. Without reforms, the contribution rate will even rise above 20% after 2025. This must be prevented. Even higher financial burdens would overburden the contributors and - because this would also increase additional wage costs and therefore labor costs - make it more difficult to maintain and create jobs.
Structural reforms are necessary:
In addition to a reduction in the level of benefits, it would be important to rebalance the tasks of pension insurance, as recommended by the BDA commission on the 'Future of social insurance: limiting the contribution burden in the long term'. The aim of guaranteeing adequate, contribution-based provision in old age and in the event of reduced earning capacity must be given greater priority. On the other hand, non-contributory benefits and expensive exemptions for individual groups of insured persons - such as the basic pension, mothers' pensions and full pension from 63 - should be reduced. Sustainability factors, on the other hand, must be strengthened.
Eliminate early retirement incentives:
The noticeable shortage of skilled workers is already a crucial issue for the future of the German economy. It is therefore important to remove all incentives for early retirement - especially the full pension from 63 - and existing disincentives that counteract an increase in working hours (e.g. sliding scale for midi-jobs, privileged treatment of part-time work for basic pensions) as quickly as possible.
Strengthen additional pension provision:
In view of the demographic challenge, most other European countries have also decided to base their pension systems not only on statutory pension insurance, but also on occupational and private pension provision. A mixed system of pay-as-you-go pension insurance and additional funded pension provision is significantly more crisis-proof and sustainable than a system based on just one pillar. In times of demographic change, additional funded pension provision offers an important advantage: it makes it possible to pre-finance future pension entitlements. A decline in the number of contributors does not have any negative consequences for funded pension provision.
A pension reform based on these principles will help to ensure the long-term financial viability of statutory pension insurance. At the same time, it strengthens the principle of equivalence and the acceptance of the existing pension system because the contributions paid in increase the individual's pension entitlement to a greater extent and are used less for other tasks.
