For the German Economy Minister Kaitharina Reich, a simple way to fix the Germany pension system is: “We need to work longer and long,” she explained flatly Frankfurt Algemine Zitung In late July, newspapers, immediately trigger a new debate with family lines. Rich argued that the pledge made by his government in the coalition contract earlier this year was not enough.
Germany’s aging population has long been recognized as a problem. The average age of the population -46.7 -Japan and after Italy, the eighth largest in the world is the third of the largest and major economies. By 2040, a full -fourth population is expected to be 67 or more. This year, the birth rate fell at its lowest point in 20 years.
It has had a notable impact: in the early 1960s, six actively insured workers for every pensioner-this ratio is 2 to 1 and sinking, and in 2025, in 2025, two-thirds of the budget of the Ministry of Labor will go into a two-thirds pension system: € 140 billion).
“This can not be durable for us for a long time that we do only two-thirds of our adult life and spend a third in retirement,” Reich said. “Unknowingly, many people have refused to accept the bee for a very long period of time.”
Reach’s statements triggled a quick backlash from his center-left cabinet colleagues. Lars Clingbil, Finance Minister and leader of the Social Democratic Party (SPD), who traditionally see themselves for a working class voters, separated the statement of Reach as “slapping on face” for many workers.
“It is easy to say that when you are sitting on your comfortable chair in Berlin,” Klingbill told the news outlet NTV. “But you should go out and talk to those in the country who are working as a roof, who are working as nurses, who are working as teachers and are actually wearing bags and who are already struggling to make it 67.”
Trade unions, Mävhile, said that Reiche’s plan was only a new way to cut pension. Many activists want to work for older due to health reasons, forcing them to retire early, and accept the cuts that permanently reduce their pension.
Increasing retirement age does not deny pension cut
The contracts were agreed by two glory parties of Germany – Rich’s Orthodox Christian Democratic Union (CDU) and SPD, promising that Germany’s current retirement age would not be raised.
Instead, the contract said, “We want more flexibility in infection from job to pension.” In practice, “flexibility” means offering encouragement to those who work beyond the age of legal retirement. This will include measures such as the so-called “active pension” (“active pension”), by which any income up to € 2,000 through the month is tax-free for people above the age of legal retirement.
Financial advice company Finanztip at pension specialist Jaan Sharpenberg, is confident that the German pension system needs to be improved immediately, but the debate around it is tedious.
He said, “The language of a working life is one of the liver liver that can be accommodated to improve the German pension system to deal with demographic changes,” he told DW. “And if I am really honest, I think it’s a bit of how the same supporters and election arguments beg for years and decades, but no real improvement is made.”
While he agrees that it may be necessary to increase the age of legal retirement, it does not deny the argument that it would mean practically, pension cut for some people. “Those two things can be true at the same time, but it does not prevent a pension improvement,” Heer said. “An improvement of the system will work only when you add and draw many liver.”
How Germany’s pension system works
The retirement age system in Germany is difficult. Currently, the growth of legal retirement in Germany is 65, although it is determined to increase to 67 by 2031. But the age has been stagged on the basis of years of individuals, and how long they have paid in the system.
And the exceptions are: Those who are disabled or paid in the system for 45 years, for example, can retire first.
The contribution of 18.6% of an employee’s gross monthly salary goes to the state retirement fund, in which employees and employers pay half of each. The government hopes that this contribution rate will increase by 2035 to 22.3%, where it should level Unil 2045.
In the German Institute for Economic Research (DIW) Public Economics researcher Johannes Gear said that the issue of retirement age is so controversial as it affects workers in a different way.
“There are many people who cannot imagine working beyond the age of 67,” he said. “But perhaps better paid jobs can do this.”
Pension income vs pension expenditure
But many experts say that narrow attention to the age of retirement is unexpected, as there are various ways to increase contribution to the pension system.
One remedy, for example, must provide better hair care facilities, so that more single parents are able to work full-time and therefore pay high pension contribution. Another solution may be to migrate to Germany to do easily and more attractive work. There are proposals to increase the number of people paying in the public system by involving self-employed and civil servants, which are recently a proposal made by SPD to Laboratory Minister Burtbel Bass.
Meanwhile, on the expenditure side of the bookkeeping, some more painful measures can be placed to balance the books. In addition to increasing the age of retirement, it may mean expanding “waiting time” (one year’s number will have to pay in the system, before anyone can start drawing pension), or reducing the rate every year when pension increases.
Pension Increte is calculated on the basis of large wages and salaries development in Germany and is 3.74% for 2025.
In the coalition agreement, SPD was capable of securing pension levels at 48% of standard pension for average income (before taxes) by 2031. Critics have labeled it as below.
According to Scharpenberg, a mixture of measures needs to be applied. But instead, he said, perennial political debate rotates to a measure or another, such as it was impossible to combine them.
International comparison
The German pension system is very different for other European countries. For example, in Denmark, the retirement age is associated with the life expectancy of the country, so that it grows automatically because people live longer.
And in Sweden, the contribution of individuals is invested in various financial markets and then the person is paid for profits when he arrives in old age.
“This helps to diversify risk,” Geor said. “They do not depend on the aging of their population.” In the German system, on the other hand, the contribution of workers is put into the same pot, which is used to finance the current pension.
Gyar argues that, unlike other European countries, the German state has failed to develop private insurance options to complement pension so that they, with the help of the entire population, only instead of rich.
“The other country has done much better,” Heer said. “UK, Netherlands, Denmark, Sweden – all of them are a system of compulsory insurance with relatively low cost and good profits. It is missing here.”
Edited by: Reena Goldenburg
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