GERMANY – The eastern German state of Saxony-Anhalt plans to set up a pension fund for its civil servants from 2008, saying the move is necessary to relieve long-term pressure on its budget.

Saxony-Anhalt employs around 2,600 civil servants who have a right to a future state pension. By 2020, it estimates that pension obligations for 10,500 retired civil servants will total €233m per annum.

Saxony-Anhalt said the pension fund would be capitalised with money from its budget.

”But the advantage is that by creating a fund, these pension obligations will not, in the long-term, burden future taxpayers,” said Jens Bullerjahn, the state’s finance minister, told the local press.

Bullerjahn added that the state’s pension obligations would be further diminished by the fact that Saxony-Anhalt was lowering the number of civil servant contracts on offer.

Saxony-Anhalt is the third out of 16 German states to finance civil servant pensions via a fund instead of tax revenue. The first was the west German state Rhineland-Palatinate in 1996, followed by Saxony, another east German state.

Meanwhile, the budget committee of Germany’s parliament (Bundestag) has urged the government to follow the three states’ examples and create a pension fund for federal civil servants.

Berlin currently spends €8.5bn a year to pay pensions for its civil servants, who also include judges and soldiers.

The chances that the government will take the MPs’ suggestion seriously are good, as they are members of the governing centre-right CDU/CSU and centre-left SPD parties.

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