The pension system is threatened with collapse: too many pension recipients, too few contributors. And this imbalance keeps increasing. But politicians – both government and opposition – are not touching the hot topic of “retirement at 70”. That is cowardice in the face of reality.
“The pension is secure!” This legendary sentence from Federal Minister of Labor Norbert Blüm (CDU) still applies – but differently than the CDU politician meant in 1986.
What is certain is that the pension will be credited to your account at the end of every month. However, it is uncertain how high it will be in the future and when it will be paid in the future. There is a simple reason for this: fewer and fewer contributors have to finance more and more pensioners. Irony of history: The amount payers that the baby boomers who are now reaching retirement age did not bring into the world are missing.
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Now our pension system is not rocket science, but works according to simple principles. Firstly, the working people finance the pensions with their contributions. Secondly, the higher the contributions and the longer they have been paid, the higher the pension. Thirdly, pensions are rising – to put it simply – at the same rate as wages.
With the major pension reform in 1957, there were six contributors for every one pension recipient. At present, 1 pensioner is financed for every 1.8 employed persons, by 2050 the ratio will deteriorate to 1.3. If fewer and fewer contributors have to shoulder an ever-increasing pension burden, there are only four ways to change this imbalance: (1) Contributions must increase, (2) pension increases must be lower, (3) the state must invest even more money add to the pension fund (almost 110 billion euros a year) or (4) the retirement age is raised further. Fifth possibility: turning all four adjusting screws at the same time.
The dilemma: Representatives of both employers and employees reject higher contributions, lower pension increases are highly unpopular in the population, as is drawing pensions later. More state subsidies, on the other hand, are hardly justifiable given the high budget deficits.
All this is no surprise. As early as the late 1970s, pension experts predicted very precisely what the demographic development would mean for the pension fund. But all governments have more or less acted according to the motto “everybody well and no one hurt”. Reforms to accommodate demographic change followed the rules of politics (“vote maximization”) rather than the laws of mathematics. In addition, the already fragile system was burdened with election gifts such as a mother’s pension and a pension at 67.
dr Hugo Müller-Vogg is a journalist, book author and former editor of the Frankfurter Allgemeine Zeitung (FAZ).
The traffic light coalition is continuing on the path of mini-reforms that are doomed to fail. The only innovative pension idea in the coalition agreement, the entry into the share pension, came from the FDP. However, in view of the planned sum (initially a one-off amount of 10 billion euros), it cannot even begin to compensate for the loss of contributions due to the departure of many contributors.
The SPD, Greens and FDP are more or less immobile in the areas where a lot could be done. The level of pensions (ratio between pensions and earned income) should not fall, contributions should only be raised minimally, and the pension subsidy from the federal treasury should not increase unbounded. With a view to the next elections, raising the retirement age is also taboo. It sounds like this in the red-green-yellow coalition agreement: “There will be no pension cuts and no increase in the statutory retirement age.”
Basically, the governing parties have opted for a policy of muddling through. In this way, one can perhaps reach the 2025 election date without tiresome debates on pensions, but no real safeguarding of the system. The metal employers have now interrupted the attempt to more or less sit out the pension problem. Stefan Wolf, head of Gesamtmetall, has clear ideas: “We will gradually have to go up to the retirement age of 70, also because people are getting older all the time.” Otherwise, the system will no longer be financially viable in the medium term.
The employer president has most of the pension experts and economists on his side, as does the Bundesbank. Because it is easier to demand than finance it to allow people to retire as early as possible with a decent pension. Anyone who rejects significantly increasing contributions as well as pension adjustments that lag behind wage increases must dare to approach the age limit.
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Federal Labor Minister Franz Müntefering (SPD) demonstrated this courage in the first grand coalition under Merkel (2005 to 2009). From 2012 onwards, the retirement age was gradually raised beyond 65 years. The 1957 born is currently retiring at the age of 65 years and eleven months. From 2031 onwards there will only be a pension at the age of 67.
Meanwhile, life expectancy has continued to rise. Most workers do not reach retirement age as a worn-out human wreck, but in the best of health. Many of them look for new part-time jobs after they retire, and quite a few continue to work full-time. In most cases, this does not happen because your own pension is so low. Rather, these “unretired” want to remain active.
Undoubtedly, there are workers who, for health reasons, cannot make it through to 65, let alone 67 or even 70. This particularly affects people who do heavy physical work. However, the system of old-age security cannot be aimed at a minority. The disability pension is for this group. Improving this would have to go hand in hand with extending the working life of fit employees.
Politicians must finally pour the citizens pure wine. The pension system in its current form is threatened with collapse. A few cosmetic repairs are not enough, they have to be readjusted. Anyone who declares the retirement age a taboo is trying to override the laws of mathematics. It’s high time that the pension politicians finally got honest – those in the government as well as in the opposition. Everything else is cowardice in the face of reality.
