With the end of the traffic light coalition, pension package II will also fall by the wayside. But what does this mean for Germany’s pensioners?
Because of the end of the traffic light government, Germany is facing new elections. These are scheduled to take place on February 23rd. First, Chancellor Olaf Scholz (SPD) wants to ask the Bundestag for a vote of confidence on December 16th. Until then, the red-green minority government will try to get some of its projects off the ground – but one thing will definitely not happen: pension reform II.
Federal Social Minister Hubertus Heil (SPD) admitted this in the Bundestag on Wednesday. The proposed law could not be completed, which he regretted, said Heil. But what does the end of Pension Package II mean now? t-online answers the most important questions.
The pension package II was the central pension project of the traffic light government. Chancellor Scholz called it the “foundation of the traffic light”. The goal: to set the pension level at 48 percent. The pension level indicates how the average pension compares to the average income of an employee.
At the same time, the government wanted to introduce the so-called generation capital, which supplements the statutory pension, which was previously financed purely by pay-as-you-go, with capital coverage – or in other words: tax money should be invested in the stock market in order to secure the pension fund (read more about this here). In return, the so-called holding line for the contribution rate to statutory pension insurance should fall, i.e. employees’ pension contributions should increase from 2025.
However, the pension level could fall after 2025 – because the holding line only lasts until then. Pension package II included a level protection clause in the pension formula, which was to be anchored in law until the pension adjustment in July 2039. The pension level should then not fall below 48 percent until June 2040. That’s the plan. From a purely legal perspective, without pension package II, pension levels are likely to fall.
Initially it should remain stable. In its spring financial estimate for 2024, the German pension insurance assumes that there will be a decline in 2025. Without extending the holding line at 48 percent, the pension level would fall to 47 percent from 2030, to 45.6 percent from 2035 and to 45.1 percent from 2040.
And the pension contributions? On the one hand, without generational capital, the additional support would be lost, which would tend to increase it in the long term; On the other hand, a falling pension level would mean that the pension fund does not need as much income – which would keep the contribution rate more stable.
A future government – which will probably be led by the CDU – would have to clarify the question of pension levels and pension contributions as soon as possible. It is currently unclear whether the pension level will continue to be fixed after 2025. In any case, Social Minister Hubertus Heil (SPD) advocates for it. It remains important “that we secure the pension level permanently, even beyond this legislative period,” Heil continued. However, it is questionable whether he will be able to do that in the coming weeks.
According to official forecasts, without reform, pension contributions could rise to 20.2 percent by 2030 and 21.3 percent by 2040. The next government would have to act here too. However, if it only continues to secure the pension level and does not introduce generational capital, the pension contribution will increase even more. Because: The pension insurance is facing a demographic problem. For every more and more pensioners there are fewer and fewer contributors. Generational capital was originally intended to provide a remedy here.
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