Schnitzer states that pension increases shouldn't occur as they previously have.
The cabinet is currently debating over a proposed pension plan. The chairperson of the German Economic Council is advocating for a major overhaul. She suggests limiting the increases in pensions and keeping the retirement age at 63 for those with lower incomes.
Monika Schnitzer, who leads the German Economic Council, has urged policymakers to revamp pensions. "Reaching a bipartisan agreement on comprehensive pension reform is crucial," she stated. "We cannot afford to let pensions keep rising as they have in the past." Schnitzer didn't specify 63 as a specific target.
The FDP had advocated for eliminating the retirement age of 63 after 45 years of employment to save money. They proposed fostering work incentives for older adults. The SPD opposes changes to the 63 retirement age. With the 2025 federal budget emerging as a topic of contention, an approved pension reform has yet to pass the federal cabinet. The planned package aims to maintain a future pension level of 48%. The government plans to invest 200 billion euros from federal funds into the capital market by the mid-2030s for pensions. The funds from these investments would alleviate contribution increases.
Schnitzer mentioned not lowering the pension entry age. "However, the increases should be curbed," she commented. "Currently, pension increases are tied to wage growth. Only a few nations have this approach." Nations typically align pensions with inflation. "In times of normal inflation, which is lower than wage growth, this would mean a smaller involvement in economic development. But at least purchasing power remains stable."
Fewer Employees Contribute to the Pension Fund after Baby Boomers Retire
With baby boomers reaching retirement age, there are less employees contributing to the pension fund, Schnitzer highlighted. "We must adapt to this," she stressed. "The issue is that baby boomers born in the 1950s and 1960s have not fully upheld the intergenerational contract. They allotted pension funds with their contributions for the existing pensioners. But they did not have or raise enough children to provide contributors for their own pensions when the time came. We need to address this somehow."
Ultimately, individuals must also save more for their own pensions, according to Schnitzer. "It was announced 20 years ago that government pensions wouldn't be sufficient for a comfortable lifestyle. Unfortunately, not all took this seriously." To make saving for pensions more accessible for those with lower incomes, state subsidies can be considered.
Schnitzer believes the deduction-free pension should be exclusive to low earners: "If you consider who's claiming this pension, these are reasonably healthy employees with average incomes. This isn't mainly for workers who cannot continue working due to physical limitations. These are individuals who can sustain a pension and live comfortably if they retire without reductions," said Schnitzer, the head of the German Economic Council, which advises the government on economic matters. "Our proposal in last year's report was to make this reduction-free pension more targeted by making it available to low earners only."
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In the context of the pension policy debate, Schnitzer suggested limiting pension increases and maintaining the retirement age at 63 for lower-income individuals, as part of her advocacy for a major overhaul. Furthermore, the Traffic light coalition, formed by the SPD, FDP, and Greens, is considering investing 200 billion euros from federal funds into pension funds to mitigate contribution increases.
Source: www.ntv.de
