Thanks to high employment, the income of the pension fund is increasing. It is estimated that this will continue for the next few years. In addition, the increased mortality from Corona has an effect, among other things. But the overall rosy years are foreseeably over.
The 21 million pensioners in Germany can hope for a positive financial situation of the pension fund in the coming years – and thus for increasing payments. The Deutsche Rentenversicherung Bund confirmed that pensions are likely to rise by around 3.5 percent in western Germany and by more than 4 percent in eastern Germany in the coming year. In times of a significant shortage of skilled workers, high employment figures and incomes are likely to be the main drivers of growth in pensions in the years to come. There are other factors, as announced by the pension insurance in Würzburg. This year, the income of the pension fund is expected to be 356.8 billion euros, 2.1 billion more than the expenditure.
Bubbling Income:
The main reason is the positive labor market and wage development, with the massive use of short-time work securing jobs in the Corona crisis, as explained by Pensions President Gundula Roßbach. “We just have a record job.” Roßbach emphasized that the increase in income from compulsory contributions from employment at plus 5.4 percent this year is likely to be particularly significant for the pension fund.
According to Anja Piel, chairwoman of the federal board of pension insurance, the official estimates assume that there will be further noticeable increases in income from the pension fund for the coming years. “We are expecting increases in gross wages and salaries of five percent for this year, next year and the year after that – that’s quite significant,” said co-chairman Alexander Gunkel. The bottom line is that the compulsory contributions to the pension fund from gainful employment should grow by an estimated 16.1 percent by 2026.
Side effect of the pandemic:
But the labor market and wage situation in Germany is not everything. “In addition, there is increased mortality (particularly as a result of the corona pandemic) with lower pension expenditure,” says a recent government document. Gunkel explained that, on average, life expectancy is not increasing as much as previously thought. This tends to have a dampening effect on pension fund expenditure. In the long term, however, increasing immigration to Germany will have a positive effect, said Gunkel. As a result, more people paid into the pension fund.
Today, women in the West receive an average pension of EUR 809 and men EUR 1218. In the east it is 1070 euros and 1141 euros. According to current estimates, pensions could rise by a total of almost 43 percent by 2036. The pension level, which indicates the security power of pensions in relation to wages, is currently 48.1 percent and is expected to remain above 48 percent until 2024. According to current estimates, however, it would drop to 44.9 percent in 2026.
Fewer contributors:
The comparatively fat retirement years are not over yet – but there are probably not too many of them anymore. Inevitably, baby boomers will retire. “According to the assumptions, the number of contributors will probably increase slightly in 2023 and 2024 at rates of 0.4 and 0.3 percent respectively and will decrease from 2025 for demographic reasons,” said Piel. Accordingly, the contribution rate should remain stable at 18.6 percent until 2026 – and according to the unpublished pension insurance report, it will rise to 21.3 percent from 2022 to 2036. However, the representatives of the pension insurance emphasized the uncertainties of the forecasts.
Next reform:
Because the rosy retirement years are coming to an end in the foreseeable future, Minister of Labor Hubertus Heil intends to launch a pension package II to secure the level of pensions in the long term. The traffic light coalition is also preparing to start partially funded, as a share pension, primarily promoted by the FDP and planned in the Ministry of Finance. There should be a capital stock of initially ten billion euros – the income should flow to the pension insurance.
There you are reserved. Any additional income is “certainly a gain,” says Gunkel. But in order to keep the pension level at the current level of 48 percent in the medium term, a three-digit billion amount is needed as capital stock. Gunkel: “That’s hardly to be expected.”
