Pension contribution remains stable

Unsurprisingly, the Bundestag has passed the Contribution Rate Act 2014. In a quick vote, MEPs called for leaving the 2014 pension contribution at 18.9 percent. With the additional additional income now mother’s pension and Co. can be financed.

The contribution rate to the statutory pension insurance should actually have been 18.3 percent since 1 January 2014. But then came the black-red coalition with its much-criticized pension reform. Shortly before the end of the year, the government stopped lowering the pension contribution rate. Now, the Bundestag has approved the Contribution Rate Act 2014 and thus fixed the pension contribution for this year at 18.9 percent. According to the draft, this should ensure “continuity, stability and planning security for the financing of the statutory pension insurance”. But given the immense costs that the currently advertised pension package will cause, this goal must be called into question. Soon the pension contribution could rise.

Experts welcome decision on pension contribution

Already on Monday, the Federal Committee for Labor and Social Affairs met to fix the pension contribution. The majority of experts welcomed the Federal Government’s plan not to lower the contribution rate. For example, Dr. Rudolf Zwiener of the Institute for Macroeconomics of the Hans Böckler Foundation, that this decision is “in view of the demographic development makes sense”. “If you want to effectively fight poverty in old age, you can not reduce the contributions under any circumstances,” says Zwiener. The Confederation of German Employers’ Associations (BDA), however, disagrees. The state gets rid of its own financing tasks in view of the full pension fund, it said in a statement. The BDA thus alludes to the financing of the pension plans. Maternity pension and pension at 63 should not be financed by taxes, but by the statutory pension insurance. This leads to a higher financial burden for the contributors.

Bundestag stipulates contribution rate to the pension insurance

The federal government expects additional revenue of 5.6 billion euros through the waiver of a contribution rate reduction. Since the Committee on Labor and Social Affairs has recommended to the Bundestag the adoption of the Contribution Rate Act 2014, the decision taken by the Members is hardly surprising. Only Alliance 90 / The Greens spoke out in the committee against the determination. From the point of view of the party, the reserve would have had to be used to cushion the increase in pension contributions, which would later increase for demographic reasons. Otherwise, performance deterioration is to be expected, so the fears of the Greens.

Pension increase 2015 is lower due to stable pension contribution

The stable pension contribution means that the 2015 pension increase for the approximately 20 million retirees in Germany will be significantly lower than previously expected. Originally, the seniors could look forward to a pension increase of more than two percent in East and West next year. Now, the stable pension contribution will reduce the increase by almost 0.8 percentage points. This is due to the so-called contribution rate factor in the pension calculation. If the pension contribution goes down, paradoxically the pensions rise and vice versa. The amount of the pension increase in 2014 will probably be finalized next month.

Vote on pension package is getting closer

With the now approved Contribution Rate Act 2014, it is becoming increasingly unlikely that anything will go wrong in the Bundestag vote on the pension package in May. In all likelihood, the pension will be introduced at 63 and the mother’s pension from 1 July 2014. However, there are still details to clarify the conditions for the pension at 63. The pension package of the black-red coalition also provides for an improved earning capacity reduction pension and a higher rehabilitation budget. By 2018, the measures are to be financed exclusively through the pension fund before a tax subsidy becomes necessary in 2019 to cover the additional costs. By 2030, the federal government expects to spend more than 160 billion euros, but experts fear additional costs of up to 233 billion euros.