Retirement benefits - What is the advantage of government employees and freelancers contributing to the retirement plan?
An expert council estimates that incorporating independent workers into the mandatory pension scheme will have "reasonable yet advantageous impacts" during the 2030s. When the first of them retire, the benefits will decrease once more. By the year 2080, the integration would still maintain modest favorable effects. Enlarging it to future public servants could also offer financial relief to the pension fund "in the short to medium term, if only those who contribute are initially accepted, but no further pensions are dignified."
The simulations project that this would create initially lower contribution rates for all insured individuals. "The overall beneficial outcome on contribution rates will gradually reverse because of the increased retirement benefits, however, around the mid-2070s," explains the economic expert.
Financing from Tax Revenues
The incorporation of extra people in the insured community is not a solution to the restoration of the pension fund. Instructionally, the state would more likely supplement the retirement benefits of civil servants with a supplementary pension on top of the regular pension they receive. The average pension currently stands at 3,240 euros per month - approximately twice as high as the standard pension. Civil service pensions already cost the state over 53 billion euros each year.
This expense would not culminate, as current pensioners and active civil servants with retirement provisions will survive for many years. Nonetheless, civil servants and independent workers fund the pension scheme indirectly: through the annual contribution of 116 billion euros from the national expenditures.
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In contrast to the proposed expansion of the pension scheme to freelancers, Germany might consider supplementing the retirement benefits of civil servants with an additional pension, further increasing the annual cost to over 53 billion euros. Despite indirect funding through national expenditures, the pension fund continues to face challenges, and the integration of freelancers may only provide short-term relief to the fund.
As Germany explores options to ensure the sustainability of its pension fund, the integration of freelancers into the mandatory pension scheme could potentially have favorable impacts during the 2030s and beyond, especially if the contributions of those eligible are accepted without granting further pensions.
