Corona and Pension

The Corona pandemic 2020, like the 2008 financial crisis, will leave its marks also on the German public pension system. The impact occurs with a delay of 1 to 2 years due to the lags in the German pension adjustment formula. The impacts are highly asymmetrical in favor of pension recipients. The pension guarantee means that the replacement rate will increase in 2021, and this the more the deeper the recession will be. Until 2019, a “catch-up factor” would have ensured that this effect would only be temporary. However, this is not the case due to the 2019 pension pact. The contribution rate for the younger generation will therefore permanently increase in all scenarios. This increase is capped at 20% until 2025 by the “double stop line”. Accordingly, substantially higher federal funds of are required to fill the emerging revenue gap.