The pension is not safe: the false heyday of insurance

The finances of the pension insurance are developing better than expected. The old age fund still needs to be reformed.

There are good news. The pension fund will not be in a bind as soon as 2025, but only in 2029. This is what the heads of the pension fund report. So there is more time to reform and more time to learn. Because a nut in the pension system is turning well.

That means more immigration. If the country is ready to become a country of immigration, future retirees will have less to give up and the burden of taxpayers’ contributions will not grow as rapidly.

In principle, the matter has been clear for years: the baby boomers will retire in the next few years. Active employees must pay their retirement benefits. But because they are fewer and fewer, the effort of each individual to make pension contributions is increasing, and insurance contributions are increasing. According to previous calculations, from 2025, either taxpayers will have to finance pensions more and more, or contributors will have to do so.

Immigrants keep coffers full

Essentially, today’s many immigrants ensure that the pension fund will remain solvent for years to come. Once they have found a job, they duly pay the insurance company and will only expect a payout for decades to come.

In addition, there is the good situation in the labor market: unemployment insurance also expects a surplus of billions in the coming year. Wage developments are also making an unexpectedly strong contribution to stabilizing finances. Because the federal government assumes a salary increase of about five percent in the next round, more contributions will flow. And cynically, the high mortality rate, especially among the elderly, in the corona pandemic naturally also relieves the pension insurance system. Those who are dead no longer need a pension.

In the short term, all this could mean the salvation of a pay-as-you-go pension insurance system. The more taxpayers that are available and the fewer older people who need a pension, the less the burden will be on people.

A lot of uncertainty about the future financial position

And yet it is a fake flower. First of all, it cannot be known whether there will be enough immigrants available in the long term who want to help the German labor market. Second, these policyholders also acquire claims and at some point expect to receive a pension, so the crisis in the system has only been postponed, not resolved.

Third, no one can say how wages will develop in the future. And fourth, life expectancy is likely to increase again after the end of the pandemic. However, these factors determine how great the pressure will be on the social system in the coming years.

Politicians make mistakes too often

The good news is that even a comparatively small group of unexpected collaborators can heal much of the damage that has occurred in recent years.

The downside is that it doesn’t protect anyone from further errors. A long-term simulation is particularly complicated at present, so it is better not to do it, says the pension insurance.

He could also have said that one does not know what other ideas politicians will come up with. Or if at some point a federal government will dare to reform the pension system. Or how inflation develops. Or the labor market.

However, if the institution of all people, in whose long-term soundness all social insured persons must rely, no longer dares to look to the future, there is cause for concern, even if the cash situation is adequate at this moment.

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