Chancellor Merz Calls for Pension Reform: Private and Work Savings Needed 0 21

The pension issue in Germany has long sparked heated discussions, but this week Chancellor Friedrich Merz personally reignited the topic, as reported by Deutsche Welle. Speaking at an event of the Association of German Banks in Berlin, Merz stated: "State pension insurance, at best, will only provide a basic level of protection in old age. This will no longer be sufficient to ensure a long-term standard of living."

According to the Chancellor of Germany, additional savings mechanisms are crucial to address this problem. He emphasized the need to develop workplace pension savings and private savings. Merz added: "And in much greater volume than we currently have, which is largely based on voluntary participation."

The article notes that this approach implies strengthening the role of stocks and other investment instruments in pension savings. However, this is a rather controversial strategy, as the stock market is known for its volatility. Today's gains can easily turn into tomorrow's losses, and vice versa.

Interestingly, Labor Minister Barbel Bas, representing the Social Democratic Party, immediately criticized the Chancellor's statements. She emphasized that Merz "created the impression that people now have to take care of their own provision." According to Bas, many citizens interpreted Merz's words as a signal that they "will not even receive a decent pension."

"The dispute between the CDU and the Social Democrats over pensions could be a precursor to something that may soon cause even greater resonance. After all, the commission on pension issues appointed by the coalition is expected to present its recommendations by the end of June," the publication notes.

The publication also reported that low birth rates in Germany, as in many other countries, lead to serious financial problems. Fewer working citizens are contributing to the state pension system, while the number of retirees continues to rise steadily.

It is noted that when analyzing the pension amount relative to total income after taxes and social contributions, Germany is at an average level with a figure of 53%. This is significantly lower than the OECD average, which reaches 61%.

Notably, in other major European countries, such as France and Italy, this figure is significantly higher. There it ranges from 70% to nearly 80%.

"However, there are even greater deviations both downward and upward. In Estonia, Lithuania, and Ireland, the level of state pension in some cases does not exceed 40%. In the Netherlands, Portugal, and Turkey, it is more than double that – over 90%," the article states.

In Germany, the average retirement age is just over 64 years, which is almost three years earlier than the legally established age for those born in 1964 and later. It is important to note that early retirement typically leads to a reduction in benefit amounts.

"In some countries, people are already required to work until the age of 67. Among them are the USA and Japan, the first and fourth largest economies in the world," the publication informs.

The level of contributions to the state pension system shows significant differences worldwide. According to OECD data, in France it reaches about 30% of income, while in Italy it is as high as 33%. In Germany, this figure is significantly lower than average, at 18.6%, with the contribution evenly split between the employee and the employer.

"One of the issues that is increasingly drawing attention is poverty in old age. In Germany, the risk is particularly high for those who earned little during their working life and barely managed to save money for private pension savings," the publication explains.

Interestingly, residents of the former communist East Germany received significantly lower pensions for a long time, despite their work experience. Full alignment with Western standards will not be completed until 2025, 35 years after the reunification of the country.

Pensions in Europe: What is Known

Earlier, the UNIAN agency reported that the average pension in Germany reaches 1500 euros per month, while living expenses amount to about half of this sum. Utility bills rarely exceed 350 euros, with heating taking up a significant portion. Germany also has a developed social security system for single pensioners, allowing a spouse to receive about 55–60% of the deceased partner's benefits.

The article also presents data on pension payments and expenses in other European countries. Additionally, we reported on the results of a recent study by the analytical center Datapulse. It showed that in Germany, the state pension covers only two-thirds of the basic needs of elderly citizens. It is noted that the average household lacks nearly 10,000 euros per year to maintain its usual standard of living.

Datapulse analysts included Germany in the list of "deficit countries," where pension payments are insufficient for a comfortable existence. Notably, Austria and the Netherlands showed higher results, surpassing Germany.

The highest pensions in Europe are paid in Luxembourg. Denmark and Norway also offer significant payments exceeding 30,000 euros.