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Study for the New Social Market Economy Initiative (INSM)

A reliable intergenerational contract?

Client

New Social Market Economy Initiative (INSM)

Year

2018


The Federal Government’s planned pension package would lead to significant additional expenditure on pension insurance and to a permanent increase in the pension contribution rate. The package would thus put a particularly heavy burden on future generations – with costs of 248 billion euros.

This is the conclusion of a study conducted by Prognos AG on behalf of the New Social Market Economy Initiative (INSM).

According to the analysis, the winners of the pension package are those born in 1974 and earlier. They will receive additional benefits to the equivalent of 343 billion euros. The losers are – in addition to future generations – those born from 1975 onwards. For them, the net additional burden amounts to 94 billion euros.

The study also looks at the effects of further extending working life from 2030 onwards, in line with increases in life expectancy: an increase in the standard age limit to 69 years in 2060.

Receiving a pension at 69 means an additional burden of 99 billion euros for younger age groups. As a result of the higher pension level, older generations would receive additional benefits amounting to 67 billion euros. For future generations, drawing a pension at 69 would also result in relief to the tune of 33 billion euros.

Background

In the February 2018 Coalition Agreement, the grand coalition – made up of the CDU, CSU, and SPD political parties – agreed to ensure the current (net) pension level of 48 percent by 2025. At the same time, this was not supposed to result in the contribution rate rising above 20 percent. For the period after 2025, the coalition agreement also aims for a double lock, which secures both the pension level and the contribution rate in the long term.

To this end, the draft RV Performance Improvement and Stabilisation Act (Pension Package), presented in July 2018, aims to create the legal basis for ensuring the current (net) pension level of 48 percent and a contribution rate of a maximum of 20 percent by 2025. In addition, with the “Maternal pension II,” the 2018 pension package includes further improvements to the recognition of time spent raising children for parents of children born before 1992 and in the disability pension benefit.

The study, in German (insm.de)

INSM press release (in German)

Author: Dr. Stefan Moog

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