A portion of citizens' income will be directed to special pension funds.
The authorities of Germany have approved a pension reform plan. Friedrich Merz and the Minister of Labor of Germany, Hubertus Heil, agreed to implement all 33 changes without exception proposed by the expert commission.
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The core of the reform will be the introduction of a practice where a portion of citizens' income is invested in special funds. It is planned that for this, employers and employees will additionally direct up to 2% of their earnings before tax deductions into the state fund. For comparison, in Sweden, where such a system has long been tested, residents can choose between investments in state and private funds.
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The reform also implies that the retirement age (in Germany, it is to be raised to 67 by 2031) will in the future be linked to life expectancy indicators, meaning it will gradually increase. The possible period for early retirement will also be extended.
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The pension amount after 2031 must be at least 48% of the average wage level. The necessary funds for this will be allocated from tax revenues.
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A number of officials will be required to make contributions to the state pension insurance fund; this will apply to deputies at all levels and self-employed officials. The new rule will not affect officials who constitute a separate social layer in Germany, receiving pensions from the state treasury rather than from the pension insurance fund.
