ifo Researcher Ragnitz Criticizes Traffic Light Coalition’s Postponement of Major Pension Reform in Germany
Fundamental problems with Germany’s pension funds must not be left until after the next round of federal elections, said ifo researcher Joachim Ragnitz in Dresden on Wednesday. “Coalition officials aren’t addressing the real problem: with baby boomers now starting to retire, the current pension level cannot be maintained indefinitely. As a result, after 2026, pension contribution rates will have to rise to more than 20 percent of gross wages.” This will directly burden Germany’s shrinking working-age generation, he said, adding that introducing a tax-financed capital stock into the statutory pension insurance system wouldn’t solve the problem either.
“The traffic light coalition, then, is leaving it up to its successors in government to distribute the burdens of aging fairly among different generations,” Ragnitz said. Still, the pension researcher praised the coalition for avoiding the originally planned pension increases of around 5 percent each for 2022 and 2023. “Technically, the suspended catch-up factor will be reinstated in the short term. Pension increases will thus be lower than wage increases in the next two years. This will permanently relieve the pension fund because future pension increases will thus start from a lower level.”
