‘Biggest increase in decades’: Bundestag discusses pension package

Updated on 05/13/2022 at 17:07

  • The federal government wants to increase pensions, Labor Secretary Hubertus Hill speaks of a sign of stability.
  • However, the package is not enough for the opposition parties. And they demand better inflation compensation for pensioners.
  • What is the government planning?

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The pension is secure. Former Labor Secretary Norbert Blum (CDU) has already made this sentence his trademark. Olaf Schulz (SPD) also made the promise of “stable pensions” the centerpiece of his campaign trail in the 2021 federal election campaign. Now the Traffic Lights Coalition wants them back. On Friday, the Bundestag discussed the pension package for Federal Minister for Labor and Social Affairs Hubertus Hill (SPD) for the first time.

In the discussion, Hill spoke of “the strongest pension increase in several decades” and a reference to stability and reliability: “In times of crisis and war, it is important for people in Germany to experience that they can count on their state.”

This is what the federal government intends to do with pensions

  • From 1st of July this year pension rise According to the federal government, 5.35 percent in the West and 6.12 percent in the East. The so-called pension value, by which the individual amount is calculated, rises to €36.02 (West) or €35.52 (East).
  • The Harmonization of pensions in the West and the East Progress is slow: After the planned adjustment, the value of the pension in the East will be 98.6 percent of the value in the West. Alignment must be completed by July 1, 2024.
  • The alliance wants it catch-up factor reactivate. The amount of the pension depends on the development of wages, so it was assumed that there will be a reduction in 2021. Instead, the minus will be compensated for the increase this year. In short: the increase could have been higher, but it has diminished due to the catch-up factor.
  • It must also rise disability pension. This feature is available to people who have not reached retirement age, but for health reasons, can no longer work or can only work to a limited extent. Those who have been receiving such a pension since 2001 should benefit now.

The federal government is working to ensure that those who have paid contributions for decades “pay for themselves with their pensions,” says Green MP and former union president Frank Bisirsek.

The FDP is particularly happy to reinvigorate the catch-up factor – an important concern of liberals. Hill’s package is not only fair to retirees, but to future generations as well: “Revitalizing the catch-up factor means that politics is not just for today’s retirees, but also for their grandchildren,” says Anya Schulz, MP for the FDP.

Criticisms from the opposition: Pensioners need every cent

So unanimously on the pension package? Opposition parties appreciate the pension increase for the traffic light positively – but they do not find the measures sufficient. He started the criticism mainly with another package from the federal government: easing due to high energy prices.

The fixed price of the energy price of 300 euros will only be given to about 44 million people working in Germany, that is, not about 21 million pensioners. “It is incomprehensible that a person who earns good money gets 300 euros in energy money, while the average pensioner gets nothing,” said Kay Whitaker, a member of parliament from the CDU party in the Bundestag. Gerrit Howe (AfD) agrees that “there should have been 300 euros to offset inflation”.

The clearest contradiction comes from the left: Member of Parliament Matthias Berkwald criticizes that the federal government only wants to pay the additional increase in disability pensions in 2024. “They want to leave often forgotten people in the rain for another two years. It’s not possible.”

In Berkwald’s view, the increase in pensions is also very low due to the high rate of inflation of seven per cent. “Retirees need every penny.”

Only keep promises for the long term

The package will be discussed in the Labor and Social Affairs Committee over the next few weeks before the Bundestag makes a final decision. This will not be the last decision on the federal government’s pension policy. An annuity is much more a permanent construction site.

The German pension system is based on a pay-as-you-go principle: the current contributors do not finance their own pension, but the pensions of existing recipients. In an aging society, this system is under increasing pressure – also because Olaf Schultz has promised not to raise the retirement age. CDU member Kay Whitaker accuses the coalition: “In the next four years they will plunder the entire pension insurance system’s reserves.”

The parties to the traffic lights know the problem – and they want, among other things, to provide a share pension. It could mean that the federal government invests at least part of the purchases in the financial market rather than financing it through a pay-as-you-go system. In the first step, ten billion euros will be used for this.

So far, the Bundestag’s stock pension remains a “ghost”, said CDU politician Whitaker in the Bundestag. This topic will keep politicians busy for a long time: the chancellor’s promise of “stable pensions” can only stay in the long run.

Sources used:

  • Debate in the German Bundestag
  • Federal government. Pensions will increase significantly on July 1, 2022

Employer boss Rainer Dolger considers the federal government’s retirement plans unsustainable. “The pension is safe only if it can be funded. The promises of the alliance no longer exist,” said Dolger of the German news agency dpa. In light of the Traffic Light Coalition’s plan to keep the pension level at 48 per cent over the long term, the 58-year-old said the long-term funding problems of the pension insurance will “only be exacerbated” by the current plans. From the point of view of employers’ associations, this level is unrealistic.

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