According to the federal government’s forecasts, pensioners in West Germany will have to prepare for a zero round in the coming year due to a corona pandemic. In the east, a slight plus 0.7 percent can be expected under the pension adjustment law, according to a pension report approved by the federal cabinet on Wednesday.
The so-called pension guarantee ensures that pensions will not be reduced until 1 July 2021, despite the current decline in wages, said the Federal Minister of Labor Hubertus Heil (SPD). The pension guarantee mechanism introduced a few years ago means that pensions will remain stable, although they should fall from a purely mathematical point of view. However, the later increase in pensions is lower thanks to the compensation mechanism. The corona pandemic not only leads to an overall decline in income, but also to a decline in income from pension insurance premiums. The actual amount of the pension adjustment will not be known until March 2021, when all the necessary data will be available.
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“Despite the current economic consequences of the Covid-19 pandemic, pension finances are in a good position,” Heil said. The regulations on the short-term allowance, from which pension contributions are also paid, played an important role. According to Heil, the contribution rate will remain unchanged at 18.6 percent in 2021. According to model calculations, it will increase to 19.3 percent in 2023 and to 19.9 percent in 2024 and 2025.
Up to 14 percent since 2015
“Old-age security in Germany is well established,” said Heil. The 2020 pension report, also discussed by the cabinet, shows that the positive economic development in recent years has reached the elderly population. The average was around 14 percent – and therefore significantly stronger than the prices of five percent.
According to information, the sustainability reserve is expected at € 36.3 billion at the end of the year – a decrease of € 4.2 billion compared to the previous year. According to the pension report, married couples will reach an average net total income from old-age pensions and other income of EUR 2,907 per month.
Men over 65 receive an average of 1,816 euros per month, women an average of 1,607 euros. This means that the total income is significantly above the statutory old-age pension, which is currently around 950 euros per month, because seniors have a different income. Approximately three percent of retirees rely on basic security in old age because their pension is insufficient for the subsistence level.
The Union complains about insufficient old-age insurance for the self-employed
Peter Weiß, a spokesman for social policy for the Union’s parliamentary group in the Bundestag, said that statutory pension insurance remained the most important pillar of old-age security for most citizens, but that the income of seniors varied. White described the lack of old-age security of many self-employed people as a problem, which is threatened by poverty in old age and the stagnation of society’s and Riester’s pensions. White called for them to be simplified and, in particular, to be more accessible to low-income earners. Participating federal ministries should no longer be on the brink.
The federal government is required to publish a pension insurance report each year. It provides information on the expected financial development of statutory pension insurance for the next five years and contains model calculations for the next 15 years. Until the adjustment in 2025, pensions in East Germany will also be reported separately.
The pension report is submitted once per election period and complements the pension report. It offers a broader overview, for example on the proliferation of corporate and private pension systems and the real income situation of pensioners. (AFP / EPD)