Corona Pandemic Burdens Contributors much more than Pensioners - Additional Costs also for the Federal Government

The Corona pandemic will place a greater burden on contributors to the pension system, while the level of security for pensioners will rise. In addition, higher federal funding for the statutory pension insurance has to be expected from 2021 onwards.  This is the result of current calculations by the Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy. 

The researchers assume that the Corona pandemic of 2020 will leave clear traces in the statutory pension insurance system, similar to the financial crisis of 2008. Due to the pension adjustment formula, the consequences will occur with a delay of one to two years and will be strongly asymmetrical in favour of pensioners. A greater burden will be placed on the contributors because the pension guarantee stipulates that the current pension value must not fall. This means that with expected falling annual wages, the pension guarantee level will rise significantly in 2021, and all the more so the deeper the recession. "Pensioners will therefore be financially less affected by the Corona crisis than the working population," explains Axel Börsch-Supan, Director of the Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

The "double stop line", valid until 2025, will cap the increase in the contribution rate (currently 18.6%) at 20%. However, except in the case of a relatively mild or short recession, the 20% stop line will be reached as early as in 2021. Without the Corona crisis this would have only been the case in 2025. As a consequence, federal subsidies need to be increased by up to 5 billion euros already next year and up to 19 billion euros in 2025.

Details of the calculations and the different scenarios can be found in the MEA Discussion Paper 11-2020, available >> here.

For questions or interview requests, please contact Verena Coscia, Press and Public Relations, Tel: 089/38602-332, Email: coscia (at) mea.mpisoc.mpg.de.