Germany has a financial problem that many people are not even aware of: the high pensions for civil servants are constantly increasing. And are becoming increasingly difficult to finance. The reasons for this and how to overcome the problems.
In 2021, the total burden for civil servant pensions in Germany was 65.5 billion euros. By 2025, the amount should rise to 81 billion euros – an increase of almost 24 percent! At least that is what the social report of the federal government from 2021 expects.
If this were to happen, then in 2025 every German citizen would have to finance civil servants’ pensions of almost 1,000 euros per year. If you only relate the costs of 81 billion euros to the 41 million citizens who pay income tax, then that results in a per capita burden of a good 1975 euros per year.
A government statistic illustrates the trend of constantly rising costs for retired civil servants, judges and professional soldiers for the period up to 2018:
However, the following applies: Even the statutory pension insurance is not financed entirely by employee contributions: the taxpayer subsidy amounts to a good 100 billion euros per year.
Germany therefore has a double problem with its old-age pension systems: the statutory pension generates its expenses only in part with income from contributions. And the cost of civil servants’ pensions is increasing at a rapid pace.
Despite the common cost issues, there are major differences between both forms of retirement. The most striking: The amount of the average pension is well below the average civil servant pension.
A look at the statistics:
According to the Deutsche Rentenversicherung (DRV), exactly 21,223,972 people received pension payments (excluding orphan’s pensions) in mid-2021. The total expenditure of the statutory pension insurance amounted to 346.471 billion euros in 2021.
This means that each pensioner “costs” an average of EUR 13,399.51. That is EUR 1,116.63 per month.
The calculated average pensions are far below the amounts that retired civil servants receive monthly. The Federal Statistical Office (DeStatis) announced on December 20, 2022 that the average civil servant pension is 3170 euros gross per month. That makes 38,040 euros per year for each retiree. On average!
The authority determines this value by dividing the pension burden of 52.5 billion euros in 2021 by the number of retired civil servants: According to the data, that was 1,380,300 people. If you type both values into a calculator app, you will receive monthly costs of 3169.60 euros per retiree (38,035.21 euros annually).
Without going into the differences between the two pension systems here, it is striking that civil servants cost three times as much money in retirement as statutory pensioners.
The high average civil service pension is a major reason why pension costs for civil servants are spiraling out of control. It also plays a role that the federal and state governments hardly make provisions for the upcoming pension burdens. The state covers the costs from current tax revenues. And the higher the payment obligations, the smaller the financial scope for other tasks.
Incidentally, the pensions mentioned are applicable law, and nobody begrudges the ex-public servants an adequate old age. But the facts show the high expenses that taxpayers have to finance.
A second reason for the escalating costs of civil servants’ pensions is that Germany affords a special feature: Many employees in the public sector are civil servants and are therefore entitled to pensions in old age.
According to the demography portal of the federal and state governments, the employment situation in the public sector in 2020 was as follows: “Of the total of around five million employees in the public sector, 1.7 million are civil servants or judges.” There are also a further 170,000 professional or temporary soldiers.
The simple finding is that where many employees work as civil servants, a high proportion will later be entitled to pension benefits.
This is confirmed by a statement from the Federal Statistical Office dated December 20, 2022. Regarding the respective proportions of certain professional groups among retired civil servants, it says:
The data from the Federal Statistical Office show that a particularly large number of teachers enjoy civil servant status. This puts a strain on the budgets of the federal states. The criticism of the economist and pension expert Bernd Raffelhüschen from the University of Freiburg starts with this circumstance.
Raffelhüschen advocates limiting civil servant status to sovereign tasks – such as the police, judiciary and, if necessary, national defence. In his opinion, employees in research and teaching do not have to be given this status. “It’s hard to see why university professors or teachers have to be civil servants,” explained Raffelhüschen in a recent interview.
In the summer of 2022, Rainer Schlegel, President of the Federal Social Court, went even further with his criticism of the current type of civil servant pensions. At the Bavarian Social Law Day in Munich, the top lawyer pleaded for compulsory pension insurance for all employees – including civil servants and the self-employed. According to a press release by the Bavarian State Social Court (LSG), Schlegel explained that there is an urgent need for reform here.
The high judge is not alone in his demand. Some trade unions are also calling for a complete reorientation of the pension scheme for civil servants.
But it is hardly surprising that the civil servants’ association dbb strictly rejects such radical demands. The dbb can provide a number of arguments for its position. Something that everyone who pays pension insurance contributions also acquires entitlements to the statutory pension scheme. A change of civil servants in the pension insurance would burden the pension fund in the future. All the more so because civil servants live to an advanced age on average and earn above-average wages.
It remains to be seen whether anything will change in the pension scheme for civil servants in the future. The debates promise some excitement.
The FOCUS Online Guide answers all important questions about pensions on 135 pages. Plus 65 pages of forms.
