Plans of the traffic light coalition: is the share pension coming now?


Status: December 6th, 2021 8:22 am

The traffic light coalition wants to expand the statutory pension to include “partial funding”. What that means – and how the plan differs from a share pension like in Sweden.

By Till Bücker,

The future of pensions has moved more into focus again since the last Bundestag election campaign at the latest. Demographic change and the simultaneous increase in life expectancy mean that there are fewer and fewer contributors. In addition, there is the early retirement of the baby boomers (“baby boomers”). Numerous experts therefore consider the statutory pension insurance to be no longer sustainable and have long been calling for a fundamental reform.

Otherwise there is a risk of “sudden increasing financing problems in the statutory pension insurance from 2025”, as the Scientific Advisory Board at the Ministry of Economics predicted in the summer. One proposal to end the imbalance of the system is the share rent brought in by the FDP during the election campaign.

Sweden model as a model

In its program, the party had advocated the so-called Sweden model. In the Scandinavian country, 2.5 percent of the statutory contributions flow into the so-called premium pension and are invested profitably through independently managed funds at low costs. As usual, the employees pay the rest into the classic pay-as-you-go insurance.

In February, Martin Werding examined on behalf of the FDP parliamentary group whether this combined security of funded and funded provision on a share basis would also pay off in this country and thus solve the problems of the system. “Basically, the question raised in the study was how one can ensure an adequate level of security in the long term with supplementary funding,” explains the professor for social policy and public finances at the Ruhr University in Bochum in an interview with

On the one hand, the stipulation was that the burden on active contributors should not increase any further. In the course of the calculations, two percentage points of the normal pension contributions went into the share pension and state subsidies for the pay-as-you-go pension were used as bridging funding. On the other hand, one also had the national debt and compliance with the debt brake in view. The result: “We were able to show that everything can just about be kept – despite the effects of the corona pandemic,” summarizes Werding.

Martin Werding is Professor of Social Policy and Public Finances at the Ruhr University Bochum. For the FDP parliamentary group he examined the “Sweden model”.

Photo: private

Sweden model is not coming for the time being

Funding is accordingly the only alternative to pay-as-you-go financing. On a long-term average, the risk of loss in broadly and internationally diversified investments that are as passive as possible, such as in index funds, are very limited and the return is higher than with other forms of investment. “We are late if we hang up the whole thing now – but not too late,” said the professor of public finance. Because demographic change does not bring about temporary tension, but is a long-term challenge.

It is questionable whether the share pension will actually come. Though In their coalition agreement, the traffic light parties are planning to expand the statutory pension insurance to include “partial funding as a permanent fund”, which is to be administered by an independent body under public law and invested globally. For the time being, however, the money does not come from the contributors. Instead, it says: “In a first step, we will provide the German Pension Insurance with a capital stock of ten billion euros from budget funds in 2022.” With this cash injection, the aim is to invest in the capital market.

“At first glance, there was hardly any movement in the pension plans. That is disappointing,” emphasizes Werding. Particularly in the pay-as-you-go part, a “clear rejection” of all reforms had been given until at least 2025. However, issues such as the postponement of the standard retirement age and the approach to the pension level are then very urgent. “It’s better to tell people that today and not pretend nothing has to happen.”

Permanent funding required

In the end, only two points remained from the share pension in the coalition agreement: the financing of a reserve for the statutory pension insurance and private pension provision based on shares. According to Werding, the first aspect is similar to the Sweden strategy, as money is also to be invested in the stock market. However, the direct route was taken by giving federal funds to the pension fund.

How the funding of the fund will continue after 2022 – whether again through the federal budget or through higher pension contributions – is still open. “In any case, you have to pursue this entry and create and invest more funds on the site year after year. Otherwise the whole thing will not help,” emphasizes Werding. In addition, a possible draft law would have to stipulate how the income from the share pension is attributed to the insured. If everyone were to pay in two percentage points of their contributions, the settlement via individual accounts would be relatively easy. In this more abstract model, that seems unclear at first.

“If you are not careful, the ten billion will be swallowed up very quickly. That is pension expenditure for ten days,” says Werling. Converted, this is only 0.8 instead of two percentage points and thus considerably less than the scenario calculated in the study. The changeover takes place much more slowly.

Experts and the general public are skeptical

Other experts also consider the sum to be too low and argue for a permanent solution. “Even if one assumes that the pension insurance could generate an above-average return with the money entrusted to it, that is only a drop in the ocean that is really of no use to any pensioner,” said Joachim Ragnitz from the Ifo Institute recently. Johannes Geyer from the German Institute for Economic Research in Berlin (DIW) made a similar statement at the end of October “An amount in the three-digit billion range would be necessary. With the income from this, one could actually support the pension, that is to say dampen the rise in contribution rates and stabilize the level.”

The partial funding is also met with widespread skepticism among the population, as a current INSA survey on behalf of the German Institute for Retirement Provision (DIA) shows. According to this, almost half (49 percent) of the more than 2000 respondents believe that the proposed ten billion euros will not be enough. Only twelve percent of the participants disagree, almost 40 percent are unsure.

43 percent also expect that the plans will not solve the problems of the pension insurance and will fail because the yields are too low at the beginning and the state cannot provide sufficient additional state funds due to the tight budget situation. However, the majority rejects an increase in the contributions to top up the capital cover.

Private pension provision is to be reformed

On the other hand, the current system of private old-age provision is to be “fundamentally reformed”, according to the traffic light parties. The offer of a publicly responsible and cost-effective fund as well as the legal recognition of private investment products are to be examined. “In 2001, with the Riester reform, we tried to take exactly this path,” says Werding from the Ruhr University in Bochum. It was just badly regulated and not binding enough.

An interesting keyword in the coalition agreement is therefore the option to opt out. “That would mean that everyone who does not explicitly say ‘I do not want’ has to participate,” said the economist. That could certainly contribute to a significant participation and signify a first step. “But we are definitely not there yet to cover the next 15 to 20 years to some extent.”

Further reform steps are necessary for this – such as raising the standard retirement age, taking hardship rules into account. Because life expectancy continues to rise, so that the retirement phase is also lengthening. In principle, the growth in expenditure from the pay-as-you-go pension must be limited. “The next 15 years in the area of ​​old-age provision will be tough,” says Werding. After that, it could at least be easier again by switching to funded coverage.

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