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Retirement benefits: Pensions are expected to increase by more than five percent

Senior woman in front of a fruit and vegetable stand

Around 21 million pensioners live in Germany.


(Photo: dpa)

Berlin The around 21 million pensioners in Germany can expect a significant increase in their salaries in the coming year. According to official estimates, pensions in western Germany will rise by 5.2 percent and in the east by 5.9 percent in July, according to information from the German Press Agency from the draft pension insurance report 2021. The German pension insurance wants to inform the public this Wednesday about the expected pension adjustment and its financial situation.

This means that pensions in West Germany are likely to rise more sharply than they have been in almost 40 years. In 1983 there was an increase of 5.59 percent. In eastern Germany, pensions last rose in 2016 with an increase of 5.95 percent, comparable to that in 2022. This year, the corona pandemic brought pensioners a significant increase. In the west there was a zero round, in east Germany an increase of 0.72 percent.

The reason was the cyclical slump in premium income. A trend reversal had been emerging for months. According to the draft pension insurance report, premium income in the current year to September has risen by around 3.7 percent compared to the corresponding period of the previous year.

If the pension increase is now estimated, a monthly pension of 1000 euros, which is based only on western contributions, increases by 52 euros on July 1, and the same pension with eastern contributions by 59 euros.

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According to current estimates, there will also be a significant increase in salaries in 2023. In the west, pensions could then rise by 4.9 percent, in the east by 5.7 percent. However, the assumptions on economic development and thus also on pension finances are characterized by uncertainty, since the development depends on the effects of the pandemic.

For 2024, the pension estimates assume a mathematical negative adjustment in the west of 0.7 percent in their model calculations. However, a reduction in pension is excluded by law. Therefore, there was a zero round for pensioners in the west in the current year, although the pensions should have been reduced in purely arithmetical terms due to the falling wage bill as a result of the Corona slump in 2020.

Pension fund reserve could increase slightly in 2021

The information comes from the pension insurance appraisers group, which consists of pension insurance experts, the Federal Social Security Office and the Federal Ministry of Labor. For the final assessment of the pension finances, the results of the tax estimate have to be awaited. You are expected next week. The concrete pension increase will not be known until March, when final data on wage developments are available.

The pension estimates assume that the reserve of the pension fund will increase slightly this year. A sustainability reserve of around 37.2 billion euros is estimated for the end of the year. This corresponds to almost 1.6 monthly expenses. At the end of 2020 it was 37.1 billion. It should be noted that “the statutory pension insurance has survived the pandemic very well so far”, according to the draft pension insurance report.

The pre-tax security level, which shows the ratio of pensions to wages, is currently 49.4 percent. According to an estimate, it should be 49.2 percent in 2025, 0.2 percentage points lower. The law does not allow the pension level to fall below 48 percent by 2025.

According to the draft report, the security force then loses the pension: “In the longer term, the security level will drop over 47.6 percent in 2030 to 45.7 percent at the end of the forecast period in 2035.” Remain stable at 18.6 percent. It is expected to rise to 22.3 percent by 2035.

More: Pension expert Raffelhüschen: “The high pension level requires significantly higher contributions”

Reference-www.handelsblatt.com

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