Enlarge image

Federal Ministers Lindner and Heil: A new package is intended to secure pension levels

Photo: Michael Kappeler / dpa

Until 2039 and beyond, the pension level should not fall below 48 percent of average income - this is what the federal government wants to set by law.

Federal Labor Minister Hubertus Heil (SPD) said at the presentation of the federal government's second pension package in Berlin that the draft law should be passed by the Bundestag before the summer.

That is the goal.

In order to stabilize the pension level at the current level and slow down the increase in pension contributions expected due to the aging population, financing should be placed on an additional footing.

A type of stock pension, which does not come close to the Swedish model, is intended to relieve the burden on pension insurance from the mid-2030s.

According to the ministers, the money for this will come from annual loans from the federal budget, initially amounting to twelve billion euros.

From the mid-2030s, the so-called generation capital should distribute revenues of ten billion euros annually.

For this purpose, a foundation will be set up that will independently decide how to invest the money.

(Read a comment here about why the compromise doesn't solve the problems in retirement.)

Lindner: Taking advantage of the opportunities offered by the capital market

"For over a century, the capital market's opportunities in statutory pension insurance were left behind," said Federal Finance Minister Christian Lindner, who presented the package together with Heil.

“Now we’re using them,” said the FDP politician.

Heil emphasized that everyone must be able to rely on the statutory pension.

Without the reform, the pension level would be decoupled from wage developments from 2027.

This means that pensioners will become poorer compared to the working population.

“We will prevent that by securing pension levels,” said Heil.

The coalition is reacting to demographic change with the pension package.

In the longer term, the number of pensioners is likely to increase more than the number of employees whose contributions are used to pay pensions.

kko/dpa/Reuters