The lobby group for Germany’s largest industrial sector has harshly criticised a hard-won political compromise over a guaranteed state pension for working people.

Gesamtmetall, which speaks for 23 member associations representing more than 7,100 companies in the metal and electrical engineering sector, branded the deal, formed on Sunday, a break from the principles of the German pension system.

Chancellor Angela Merkel’s bloc, consisting of the CDU and CSU parties, agreed yesterday with the SPD — its coalition partner since early last year — a package to increase retirement income for what the SPD said would be as many as 1.5m long-term earners from 2021.

The issue had been key for the SPD, and the failure so far to secure a deal was seen as a threat to the stability of the ruling coalition.

According to the agreement, the basic pension (Grundrente) is to be paid from January 2021 to anyone who has paid contributions for 35 years, with periods of parenting and caring for relatives counted. This will be subject to a comprehensive income test, but not an assessment of property.

Gesamtmetall director general Oliver Zander said:  “Anyone who has paid little into the pension system over a lifetime is now getting a significantly higher pension — higher than the contributions he has made, and higher than the pension of other pensioners who have paid in more but don’t meet the requirements for the basic pension.”

He said this new injustice would have to be made up for in a few years, and then the country would end up with a political unconditional minimum pension.

“This has nothing to do with the basic principles of our pension system. It’s a break with the system,” Zander said.

He accused the federal government of ignoring demographic change.

“We do not know today how our country will pay the pension burden in 10 years. But instead of finally changing course and doing without more pension gifts, billions more euros are being added to the pensions burden,” he said.

Anyone who pretended to be concerned about the future of young people should not support such a pension policy, said Zander.

Also included in the coalition agreement are measures designed to strengthen the system of occupational pensions, reduce the contribution to unemployment insurance for a limited period, double the tax allowance for employee equity investments as well as the subsidy amount for low-paid occupational pensions.

A fund for future technologies of up to €10bn, particularly in the areas of digitalisation and climate, is to be set up by the Kreditanstalt für Wiederaufbau.

According to the wording of the pact, the parties aim to change the current situation where occupational pension payments trigger additional statutory health insurance (GKV) contributions, “in order to strengthen the acceptance and trust in occupational pensions”.

They said the exemption limit for pensions would be changed into a “dynamic” free allowance, with a deduction creating relief for all compulsorily-insured company pension recipients.

The resulting shortfall in contributions will be financed entirely by the GKV resources, according to the agreement.

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