Good news! Significant increase in german pensions

Pensioners will receive more money as of 1 July:

Payments will increase by 5.35 percent in western Germany and by 6.12 percent in the new federal states. This was announced by the Federal Ministry for Labour and Social Affairs. The development showed that the pension system was working in spite of the current crises, said the Federal Minister for Labour and Social Affairs, Hubertus Heil.

According to data provided by the Federal Statistical Office and the German pension authority (Deutsche Rentenversicherung Bund), this increase will raise the pension value in western Germany from 34.19 to 36.02 euros and in the eastern states from 33.47 to 35.52 euros.

“This is good news for those people whose labour has been keeping things running for years,” Heil said.

“Catch-up factor” already costed in

The adjustment takes account of the reinstatement of the so-called catch-up factor, thereby implementing one of the important provisions of the coalition agreement: reinstating the catch-up factor will ensure that the pension reduction that was not applied in the previous year is offset against the pension increase, so that the pension adjustment follows actual wage developments. 

Pension insurance in good shape following the crisis

According to Heil, it is important to see that “our pension system works”, particularly in view of the current challenges such as rising prices and the international crisis situation. Pension rates, he went on to say, should not be decoupled from wage trends.

The Federal Government will shortly be introducing a bill to this effect, which will also make provision for improvements for the recipients of occupational pensions.

Source: Official Website of The federal republic of germany”:

https://www.bundesregierung.de/breg-en/search/pensions-to-increase-as-of-1-july-2019450

General informations about the german pension system

Germany’s pension system is often regarded as one of the most generous in the world, offering comprehensive coverage to its citizens. The country operates a pay-as-you-go system in which current workers pay into the system to support those who have retired.

Here are some key features of the German pension system:

1. Eligibility: In Germany, workers can retire at the age of 63, provided they have paid into the pension system for at least 35 years. However, the retirement age will gradually be raised to 67 by 2030.
2. Pension benefits: The amount of the pension is based on the average earnings of the worker over their entire career. The more a worker earns, the higher their pension will be. In addition, there are special benefits for those who have worked in physically demanding jobs or have disabilities.
3. Funding: The German pension system is financed through a combination of contributions from workers, employers, and the government. Currently, the contribution rate is 18.6% of gross income, with workers and employers each paying half.

Compared to other countries, Germany’s pension system is relatively generous, especially for low-income workers. However, it is also expensive to maintain, and there are concerns that the aging population and low birth rate will put a strain on the system in the future.

In contrast, some other countries have adopted more private pension systems, where individuals are responsible for funding their own retirement through contributions to personal retirement accounts. This approach places more responsibility on individuals to save for their own retirement, but it can also be more flexible and may provide higher returns in some cases.

Overall, the design of a pension system depends on a country’s economic, social, and political context, and there is no one-size-fits-all solution.