Radical Pension Reform

There is little doubt about the need to reform the German pension system. In an article in the FAZ (20 March 2020) and subsequently on SWR 1 (15 May 2020), Prof. Ulrich Becker, Director at the Max Planck Institute for Social Law and Social Policy, identifies four decisive points for a sustainably financed and balanced old-age provision in Germany.

One of the central points is a balance in the system. Insured persons with above average earnings could be allocated relatively fewer income points, while those with low earnings could be allocated more. Unlike the so-called basic pension, this compensation would benefit all insured persons with below-average earnings and could dispense with questionable differentiations. Redistribution within the pension insurance system would also create more material equality, since those living in wealthy households tend to live longer. A reverse income-related differentiation of pension entitlements readjusts social inequalities which, in the existing system, lead to a de facto redistribution from the bottom to the top.

In Prof. Becker's opinion, better pension assessments of periods of temporary unemployment and various interruptions in employment are also necessary, especially in favour of nursing of relatives, but also to enable vocational training. Moreover, it is worth discussing the inclusion of civil servants in the statutory pension scheme. The prevention of poverty, however, should be left primarily to a tax-financed, means-tested safety net in the form of social assistance.