Retirement provision: Forecast: Pensions will increase by up to 4.2 percent next year

Good news for 21 million pensioners in Germany: They can probably expect more money in the coming year.

Retirement provision: Forecast: Pensions will increase by up to 4.2 percent next year

Good news for 21 million pensioners in Germany: They can probably expect more money in the coming year. In western Germany, pensions are expected to rise by around 3.5 percent in July and by a good 4.2 percent in eastern Germany. This emerges from the draft of the pension insurance report 2022, which is available to the German Press Agency. The "Bild am Sonntag" had previously reported. The details:

Expected pension increase in 2023

With a pension of 1000 euros, the estimated adjustment means an increase of around 35 euros in the west and 42 euros in the east. Federal Labor Minister Hubertus Heil (SPD) called the forecast increase in the "Bild am Sonntag" "noticeable". However, the estimate for the coming year is below the level of the increase from which pensioners benefited on July 1 of this year. In the west, pensions rose by 5.35 percent in the summer and by 6.12 percent in the east. The data for 2023 are provisional and will not be clear until next spring.

forecasts for the coming years

According to the report, pensions are expected to rise by a total of almost 43 percent by 2036. This corresponds to an average growth rate of 2.6 percent per year, it said. The pension level, which is currently around 48.1 percent, will remain just above 48 percent until 2024. It expresses the ratio of pensions to wages and thus the security power of pensions for pensioners. By law, the level cannot drop below 48 percent by 2025. Heil affirmed in the "Bild am Sonntag" that another pension reform is planned: "Next we will take care of keeping the pension level stable in the long term, well beyond 2026."

Basics of Estimation

The calculations up to 2027 are based on the Federal Government's current economic assumptions of October 12th. They had lowered their forecasts for the economy significantly and projected a contraction of the economy by 0.4 percent for the coming year. The results of the tax estimate, which were published on October 27, were also taken into account in the estimates for pensions, it said.

Development of contribution rates

According to the provisional calculation, the contribution rate should remain stable at the current value of 18.6 percent until 2026. According to the newspaper, Minister Heil said that, contrary to many forecasts, it was possible to keep the contribution rate stable for longer than expected. It is good news, especially in the current cost crisis, "that working people can rely on the fact that the contribution rate will not increase". The pension reform will also pay attention to the development of contributions. The contribution rate is the share of the gross monthly wage that is earmarked for pension insurance. It is paid half by the employer and half by the employee.

position of the pension fund

Overall, the results in the pension insurance report are called "gratifying". Current framework conditions had a favorable effect on pension finances. "In the short and medium term, the stable labor market with the expected strong wage increases as a result of inflation will lead to a significant increase in income," state the pension estimators. There is also an effect that can be attributed in particular to the consequences of the corona pandemic: increased mortality with lower pension expenditure. In the long term, however, higher immigration is decisive for the more favorable financial development, it is said. But here, too, a slower rise in life expectancy is having an impact on development.

According to the current plans, the 2022 pension insurance report is to be decided by the cabinet on November 30th. The Bundestag and Bundesrat then have to deal with the data.

demands of the associations

According to the assessment of the German Trade Union Confederation, the increases will come too late in view of the inflation. "Pensions always follow wages with a delay of more than a year; that's why it's not enough in the event of sudden price increases and subsequent higher wage increases if pensions rise significantly in July 2023 or even in 2024," said DGB board member Anja Piel. The Social Association Germany also expressed criticism: "The increase in inflation must also be reflected in the adjustment of pensions," said SoVD CEO Michaela Engelmeier. The adjustment now planned is therefore set far too low and is not sufficient. According to preliminary official information, consumer prices in Germany in October were 10.4 percent above the level of the same month last year. This is the highest value for about 70 years.