Germany’s Social Democratic Party (SPD) has offered its support for the expansion of occupational pensions through tax incentives in exchange for the vote of the Union, the alliance between the CDU and CSU, in favour of the basic pension, IPE has learned. 

The final parliamentary vote on the so-called Grundrente is scheduled for tomorrow, 2 July.

The Union wants to further support occupational pensions in a bid to encourage individuals to start saving in pension schemes early, a source told IPE.

Models to change occupational pensions had already been designed, and could be negotiated in the course of the year to become law.

Up to two million additional employees could benefit from incentives for occupational pension schemes, the source added.

The SPD has additionally promised to the Union a reform of the Riester-Rente after the summer break in order to win the latter’s support for the proposal of a basic state pension. 

IPE reported last week that the German ministry of finance, led by the SPD’s Olaf Scholz, is working behind the scenes with insurance companies and banks to evaluate possible changes to the privately funded Riester-Rente pension system.

The leader of the parliamentary groups of the SPD and the Union have agreed to first adopt the basic pension, but IPE has learnt that negotiations have taken place also with regards to the Riester-Rente, IPE has learnt.

Grundrente debates

The SPD pushed strongly for the basic pension, which was included in a contract to support Angela Merkel’s government in 2018.

But debates erupted about how to put in place the measure and its long-term financial sustainability.

Alexander Dobrindt, chairman of the CSU regional group in the Bundestag, announced that the Union accepted funding the basic pension using resources from the federal budget, but accused the labour and finance ministers, both SPD, of not sticking to their promises to fund it through a European financial transaction tax.

The German federation of employer representatives (BDA) said the coalition had failed to clarify how the basic pension will be financed.

The Grundrente is estimated to cost €1.3bn in the first year in 2021, when it would enter into force.

The Union would approve the basic pension, but reluctantly, the source told IPE.

The Deutsche Rentenversicherung (DRV), which administers the state pension scheme, has raised questions about the process to grant basic pensions.

Pensioners can request a basic pension from January 2021, but it will probably be paid from the middle of next year.

The BDA considers the administrative costs for the basic pension “absurdly high”. 

It said the Grundrente was ”the most unfair and bureaucratic reform” since the introduction of the pay-as-you-go pension scheme.

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