Guaranteeing Pension Eligibility at 48 Percent of Earnings for Bas
Getting Old and Still Reaping the Rewards: Steffens' Pension Move
Barbara Steffens, the Federal Social Minister, is pulling out all the stops with her first pension law. By securing a pension level at 48%, she's making good on her promise with a hefty financial commitment. The bill, submitted for government approval, also demolishes certain barriers, empowering older workers to carry on working if they so choose.
Steffens shared in ARD Tagesschau, "This means stability for the people, assuring a stable pension after a long, hardworking life." The billdraft explains, "The cap on the pension level at 48% will persist until 2031, delaying the decoupling of pensions from wages until then."
So, what's this pension level?
The recent pension boost accounted for the existing temporary cap. As of July 1st, over 21 million German pensioners are set to pocket a 3.74% increase in benefits. The pension's value was set by regulation to reach the regulation's mandated pension level of 48%.
The pension level quantifies pension security relative to wages. It's essentially a ratio of average income to a "standard pension." Honoring a stable pension level ensures the statutory pension keeps pace with wage growth. "The additional costs assumed by the pension insurance fund will be repaid by the federal government from tax funds," the draft states. "This way, impacts on the contribution rate are generally avoided."
What does it cost, then?
Our aging population is putting pressure on the pension system. In the coming years, fewer people will be contributing to the fund, while more will be collecting old-age benefits.
Without changes, the pension level would plummet from the current 48% to 46.9% by 2030 and to 44.9% by 2045. Pensions would grow less compared to the earnings of employed individuals. In particular, the SPD had hoped to ensure a stable pension level – to avoid burgeoning wage-related costs, employers cautioned. Yet, large-scale tax funds are now on the horizon.
According to the bill, the reimbursement of the additional costs of extending the cap and other measures from 2029 will initially cost 4.1 billion euros. In 2030, expenses are expected to reach 9.4 billion euros, and in 2031, they'll peak at 11.2 billion euros.
In 2029, the federal government plans to present a report on the development of the contribution rate and federal subsidies. This report will assess what's necessary to sustain the pension level of 48% beyond 2031.
Parental Allowance Pension will only begin in 2028
In the future, the period of child-rearing in the statutory pension insurance will extend by an additional six months for children born before 1992, reaching a total of three years. This expanded parental allowance pension won't be paid out until 2028, since the pension insurance requires two years after the law's announcement for technical implementation.
Moreover, the current ban on returning to a previous employer upon reaching retirement age will be lifted, making it easier for people to rejoin their former employers.
The 2 sentences that contain the words 'live', 'finance', 'business', 'politics', 'general-news' and follow from the text are:
- "Barbara Steffens' pension move, a significant business and political decision, aims to secure a stable financial future for millions of German pensioners, becoming a general-news topic of interest."
- "The extended parental allowance pension, a part of the new pension law, will contribute to families' finances, impacting the general-news, business, and politics landscapes in the future."
