The expansion of capital market-based, private old-age provision at the expense of the statutory pension and the extension of working life at the expense of a well-deserved retirement have been the two core demands of conservative and employer-oriented pension policy for more than two decades.

The explanatory legend of the liberal-conservative reform proposals is always the same: “We” could no longer afford the pay-as-you-go statutory pension.

The high contributions to the wage burden the companies too much, the employees would collapse under their burden, and the state must now pump more than 100 billion euros in tax money into retirement.

The situation is exacerbated by demographic change, which means that fewer and fewer contributors have to pay higher and higher contributions for more and more retirees.

All standards are lost

The fact that the statutory pension must and can do much more for social cohesion than any form of funded, private provision is mostly concealed: because the statutory pension does not only involve employers in the financing of old-age pensions (around 22 billion euros per month), but the statutory pension transfers more than 23 billion euros in health insurance contributions for pensioners each year, thereby relieving the health insurance companies. It protects widows and family carers, compensates for child-rearing periods and low wages, and pays the chronically ill a disability pension.

All of these are benefits that a private pension cannot replace; just as little as participation in the development of prosperity. Because, in contrast to private pensions, the statutory pension not only compensates for inflation risks due to the annual dynamism, but is essentially linked to the wage development (cost of pension adjustment 2020: 12.3 billion euros.

But when talking about the collapse and the high costs, not only is the performance of the statutory pension missing, but any economic benchmark is also lost.

If one asks about the share that the federal subsidies for the statutory pension make up in the federal tax income - i.e. how the expenditure relates to the income - it turns out that this share has increased from 41 percent to 30 percent since 2005 (2019) has declined and will remain stable until 2025 according to the federal financial planning.

The myth that the statutory pension is too expensive

The same applies if you do not regard pension expenditure - as alleged pension popes do it again and again - as a context-free amount of billions that grows annually, but relate it to the wealth generated: According to the definition of the European Union, the state's pension expenditure is 196 Billions rose to 333 billion euros (2019), but their share of government spending is stable at 21 percent (2000: 19.5 percent). Even more important: their share in the gross domestic product also remains at 9.7 percent (2000: 9.3 percent).

If you dare to look into the crystal ball, as the EU Commission regularly does in its aging report, which nobody in Germany seems to be aware of, total pension expenditure will only rise moderately from 10 to 12 percent by 2045 despite the demographic change of gross domestic product and then likely to remain constant until 2070.

And also for the third factor, the contribution rates for statutory pension insurance, the following applies: the current contribution rate of 18.6 percent has never been lower since 1995, on the contrary: it has continuously declined since its peak between 1997 and 1999 at 20.3 percent just as the total contribution rate to the four social insurances has decreased from 42.1 percent (1999) to 39.6 percent today.

Against this background, the explanatory legend for a switch to more funded, i.e. more share-based, private old-age provision falls apart without a word about the risks and hidden costs of funded old-age provision. The federal subsidies, pension contributions and also pension expenditures develop parallel to the economic efficiency of our society and do not “explode”. Rather, these figures show that we are paying too low a contribution rate in historical comparison and spending too little on our older generation in comparison with other European countries, thus bleeding the pay-as-you-go system to death.

Are we finally starting to leave the myths of the too expensive statutory pension behind us and prepare them for the future with a triad of moderately increasing contribution rates, stable tax financing and a policy of good wages and good work?

I advocate it.