The Federal Ministry of Finance has launched the planned multi-billion share pension to strengthen statutory pension insurance. The entry into a capital cover is an important step to make the pension more demographically stable and to increase the pension level in the long term, according to a paper, as the German Press Agency learned from ministry circles on Friday. The “Frankfurter Allgemeine Zeitung” reported about it first.
According to the paper, the capital stock required to get started with the capital cover, a so-called share reserve, is to be built up “partially through credit financing” – i.e. with debt. To this end, budget funds in the form of loans totaling ten billion euros are to be allocated in 2023. From the mid-2030s, income from the capital stock should contribute to stabilizing the development of the contribution rate for statutory pension insurance, according to the paper. The purpose of earmarking the income from the capital stock in favor of the German pension insurance is to be anchored in law. The timetable has been coordinated with the Ministry of Labor and Economic Affairs.
“Return opportunities” should be used
In their coalition agreement, the SPD, the Greens and the FDP had announced that they would go into partially funded statutory pension insurance in order to stabilize the pension level and pension contribution rate in the long term.
According to the Ministry of Finance’s paper, the aim is to use the capital stock to take advantage of the “return opportunities” of the global capital market. Some European countries have been doing this successfully for decades. The management of the fund should be transferred to a new, independent public-law body to be established.
The head of the Federal Association of Small and Medium-Sized Businesses, Markus Jerger, told the German Press Agency: “From 2025, our pension system is threatened with a financial emergency due to the retirement of the baby boomer generation. By 2040, there will be fewer than two employees who will finance one pensioner . Even the share pension, which we advocate as an additional pillar of old-age provision, cannot compensate for the structural deficits.” If the federal government wants to prevent the collapse of statutory pension insurance, it must undertake fundamental reforms. “These include adjusting the retirement age to 68, more incentives for earning opportunities in old age and including civil servants as contributors to social security.”
