Labour Minister Bärbel Bas (SPD) has said that freelancers and self-employed people, civil servants and MPs in Germany should be obliged to pay into the country’s statutory pension system.
Bas says freelancers should contribute to German state pension system
Minister for Labour and Social Affairs Bärbel Bas has said that Germany’s pension system should be reformed, so that freelancers, self-employed people, civil servants and members of parliament are all obliged to pay into the statutory pension scheme.
Bas, who took over the role less than a week ago, when the CDU/CSU-SPD government entered parliament, has already seen her proposal spurned by CDU/CSU coalition partners and the German Civil Servants’ Federation (dbb). Germany’s social welfare association, the VdK, and the Left Party (die Linke), both said they would be in favour of Bas’s proposed reform.
Currently, participation in pension insurance is mandatory for anyone working a full- or part-time contract in Germany, with each employee’s contribution based on annual income. Half of this contribution is paid by their employer.
However, self-employed or freelance workers are not obliged to contribute; they can pay into the state pension system voluntarily or opt for a private pension. Civil servants are entitled to a special occupational pension scheme supported by state allowances and tax benefits. During their period in office, members of the German Bundestag pay into a “Altersentschädigung” (“age compensation”), separate from the statutory system.
Bas’s proposed reform comes as Germany - and many other European countries - look for more ways to future-proof their state pension systems ahead of forecasts that the continent will face a significant demographic shift in the coming years.
According to the Federal Statistical Office (Destatis), by 2035 Germany’s working-age population will shrink to between 45,8 and 47,4 million people. This means around four to six million fewer people will be working in the country, which currently has a population of 83 million.
Germany’s ageing population presents a great challenge. The current statutory pension system is a pay-as-you-go scheme, in which the working population pays for pensioners’ benefits. In 1992, 2,7 people working people funded the pension payments of one retired person. According to 2020 figures, this burden falls on 1,8 people. By 2030, just 1,5 people will be responsible for paying the pension of one retiree.
As a result, significant changes to the statutory pension system are likely in the coming years. These changes could include further pension contribution increases or the government deciding to increase the retirement age (currently 67 years old).
Alternatively, the government may decide to sink the Rentenniveau (pension level), which currently sits at 48 percent. The Rentenniveau is the percentage of the current average German wage that a pensioner who has paid into their pension fund for 45 years receives when they retire.
The government could also increase the amount of money it contributes to supporting the statutory pension system (currently 100 billion euros annually). This could be funded by making budget cuts in another area or increasing taxes.