Critics Assess Union and SPD's Retirement Plans: An Expensive Election Gift

In recent years, Germany's pension system has faced increasing scrutiny. Experts believe that the coalition agreement between the CDU, CSU, and SPD is unlikely to address the ongoing issues plaguing the pension system. The recently unveiled coalition agreement outlines several ambitious goals for the new government, particularly concerning retirement policies. However, experts have expressed skepticism regarding these plans, suggesting that they merely defer the fundamental challenges.

The proposed plans aim to legally guarantee the current pension level of 48% until 2031, with the intention of alleviating the financial burden on citizens. This commitment, however, is expected to incur significant costs, which the coalition intends to cover through taxpayer funds to prevent an excessive increase in pension contributions. Moreover, retirees who choose to continue working may benefit from a tax-free allowance of up to EUR2,000 per month. The coalition also aims to expand the 'Mother's Pension' (Mütterrente).

Among the notable proposals is the introduction of a 'start-earlier pension' scheme. Under this initiative, for each child aged between six and eighteen attending an educational institution in Germany, a monthly contribution of EUR10 would be directed into a personal, privately-managed retirement savings account. However, there will be no changes to the retirement age.

Experts have raised concerns about the effectiveness of these measures in resolving the pension crisis in Germany. Some, like Professor Axel Börsch-Supan from the Max Planck Society, have criticized the plans as lacking substance. He argues that they do not offer any real relief for younger generations and merely postpone the difficult decisions that lie ahead. Others have pointed out that the simultaneous proposal to lower taxes while increasing pension expenditures creates a troubling fiscal outlook.

Professor Christian Hagist from the WHU Otto Beisheim School of Management described the commitment to maintaining the pension level as an 'expensive election gift at the expense of young people.' He warned that the coalition is merely providing a false sense of security, which could exacerbate the ongoing challenges within the pension insurance framework.

Further critiques come from Professor Joachim Ragnitz of the ifo Institute, who believes that the coalition has squandered an opportunity for significant reform. He characterized the start-earlier pension initiative as somewhat trivial, noting that it would yield only modest returns for individuals over time. The expansion of the Mother's Pension has also been criticized as being politically motivated rather than based on fiscal necessity.

In contrast, the German Social Association (SoVD) has expressed a more positive perspective, commending the coalition for reaching what they describe as 'good compromises' in their pension proposals. The chairwoman of the SoVD highlighted the inclusion of new self-employed individuals into the statutory pension insurance scheme as a commendable step. Nevertheless, she also emphasized the necessity for further reforms to ensure the sustainability of the pension system.