A lack of broad political consensus, and opposing views among social partners, are harming the long-awaited approval by the German government of the reform package Rentenpaket II.
The cabinet finally gave the green light to the pension package Rentenpaket II this week, to stabilise the level of pensions at 48% of wages until 2039, and start equity investments to slow down the increase in contributions.
The country’s liberal party (FDP), which had blocked a possible compromise on the reform for reasons relating to public spending, displayed frustration for a reform that clearly did not meet the party’s expectations.
Soon after the cabinet approval, finance minister and leader of the FDP Christian Lindner said: “We need a pension package III, [the pension package II is] in a sense the forerunner of a pension package III, which must come as soon as possible.”
Christian Dürr, head of the liberal party’s parliamentary group, made clear that further reforms are necessary, pointing at making retirement more flexible, like in Sweden, to keep people at work longer and relieve the first pillar from demographic pressure.
Hubertus Heil, federal minister for labour and social affairs for the Social Democratic Party (SPD), defended the two pillars of the reform – stable level of pension and generational capital – hinting at a “flexible transition to retirement”, adding, however, that people insured for a long time could still opt to retire early, at 64 or 65, referring to the early retirement option “Rente ab 63” opposed by the FDP.
SPD and the Greens are also not fully supporting the transition to the Swedish premium pension model.
“The generational capital fund won’t offset the massive increases in contribution rates”
Stephan Stracke, head of labour market and social policy for the CDU/CSU parliamentary group
The generational capital fund, wanted by the FDP, did not convince the Greens straight away, said Robert Habeck, federal minister for economic affairs and climate action, and leader of the Green Party.
The Greens fear financial market volatility, which could lead to losses, and reject the idea that contributions may flow to the fund, like in Sweden.
The Union – the German coalition between the Christians Democratic Union (CDU) and the Christian Social Union (CSU) – said the pension package lacks answers on the stability of pensions in the future.
“The generational capital fund won’t offset the massive increases in contribution rates. This is the opposite of security and reliability in retirement,” said Stephan Stracke, head of labour market and social policy for the CDU/CSU parliamentary group.
Hans-Jürgen Urban, board member of the IG Metall union, has called to go beyond the 48% mark to anchor the level of pensions to wages.
“That would definitely be better than speculating with the uncertain interest rate bet through the generational capital,” he said.
Setting the level of pensions at 48% of wages until 2023 represents a burden on the shoulders of the younger generation, according to the German Insurance Association (GDV).
The pension package II is “the most expensive law of this century”, said the German Employers’ Associations (BDA).
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