The approximately 21 million pensioners in Germany can look forward to an increase in their payments in the coming year. According to an official estimate, pensions are expected to rise by around 3.5 percent in western Germany and by a good 4.2 percent in the east in July, according to the draft of the 2022 pension insurance report, which is available to the German Press Agency. The “Bild am Sonntag” reported about it first.
The estimate for the coming year is therefore below the level of the increase from which pensioners benefited on July 1 of this year. In the west, pensions rose by 5.35 percent in the summer and by 6.12 percent in the east. In 2021, the effects of the corona pandemic were still clearly noticeable in pensions: in the west there was a zero round, in east Germany an increase of only 0.72 percent.
Federal Minister of Labor Hubertus Heil (SPD) told the “Bild am Sonntag”: “According to the data now available, pensioners can again expect a noticeable increase in pensions in the summer.” The expected increase in 2023 means an increase of around 35 euros in the west and 42 euros in the east for a pension of 1000 euros. According to the report, pensions are expected to rise by a total of almost 43 percent by 2036. This corresponds to an average growth rate of 2.6 percent per year.
The calculations up to 2027 are based on the Federal Government’s current economic assumptions of October 12th. They had lowered their forecasts for the economy significantly and projected a contraction of the economy by 0.4 percent for the coming year. The results of the tax estimate, which were published on October 27, were also taken into account in the estimates for pensions, it said.
More reserves in the pension fund
In addition to the assumptions about the pension increase, the estimators assume that the financial reserve of the pension fund will increase this year. A sustainability reserve of around 41.7 billion euros is estimated for the end of the year. At the end of 2021 it was still just under 39 billion euros – more than 2 billion euros less than expected for this year. The so-called sustainability reserve is intended to compensate for fluctuations in contributions during the year.
The pre-tax security level, which shows the ratio of pensions to wages, is currently around 48.1 percent and will remain just above 48 percent until 2024, according to the report. By law, the pension level cannot drop below 48 percent by 2025. Until then, legal limits apply: the pension level must be at least 48 percent, the contribution rate must not exceed 20 percent. Heil announced the next pension reform in the “Bild am Sonntag”: “Next we will take care of keeping the pension level stable in the long term, well beyond 2026. We will also pay attention to the development of contributions.”
According to the provisional calculation, the contribution rate should remain stable at the current value of 18.6 percent until 2026. According to the newspaper, Minister Heil said that, contrary to many forecasts, it was possible to keep the contribution rate stable for longer than expected. This is good news, especially in the current cost crisis, “that working people can rely on the fact that the contribution rate will not increase”.
Corona affects spending
Overall, the results of the pension insurance report are “gratifying,” the report says. Current framework conditions had a favorable effect on pension finances. “In the short and medium term, the stable labor market with the expected strong wage increases as a result of inflation will lead to a significant increase in income,” the pension estimators state. There is also an effect that can be attributed in particular to the consequences of the corona pandemic: increased mortality with lower pension expenditure.
In the long term, however, higher immigration is decisive for the more favorable financial development, it is said. But here, too, a slower rise in life expectancy is having an impact on development.
According to the current plans, the 2022 pension insurance report is to be decided in the cabinet on November 30th. The Bundestag and Bundesrat then have to deal with the data.
