Pension Reform These seven points secure our pensions

Let’s just turn the tables for a moment: Let’s not always just talk about what benefits we’ll still be able to afford in the future with the lowest possible pension contributions. Instead, let’s talk about what kind of pension is appropriate after a long working life.

That is the fundamental idea behind the German Trade Union Federation’s (DGB) decision to establish its own pension commission.

The DGB commission is intended to serve as a counterpoint to the federal government’s official pension commission. Germany has been debating that commission’s proposals for months. However, the discussion focuses almost exclusively on impending cuts: the full pension after 45 years of insurance contributions is set to be eliminated, the retirement age is to rise further, and partial retirement programs are to be restricted.

For IG Metall and the DGB, one thing is clear: cuts and eliminations are the wrong approach. Pensions must be enough to live on, not just to survive. Anyone who has worked their entire life must be able to live in dignity during retirement.

A different pension policy is possible

This commitment to benefits was the starting point for the DGB Pension Commission, on which IG Metall is represented by its First Chair, Christiane Benner.

The commission has now presented its final report. The report shows that a different pension policy is possible.

The guiding principle here is that anyone who has worked for a long time, paid contributions, raised children, and cared for family members must be able to participate in social life in old age. This right must also apply in cases of reduced earning capacity.

With their proposal, the unions are correcting the pension policies of the past 25 years.

Since the 2001 pension reform, policymakers have abandoned the goal of “securing the standard of living.” Since then, the standard of living in old age was supposed to be guaranteed only in conjunction with private and workplace pension plans. But this idea has never worked. 

People with lower incomes, in particular, never had the money to make adequate private provisions. The insurance industry, on the other hand, profited by selling overpriced policies for many years. The DGB and IG Metall are now saying: It’s time for a change of course.

“Instead of constantly bailing out the financial sector, the federal government must strengthen the statutory pension system,” demands Ralf Reinstädtler, IG Metall’s Executive Board Member for Social Affairs. “Reforms are absolutely necessary; what matters to us is the direction of those changes. As IG Metall, we call for a reform policy based on solidarity that ensures an adequate pension for all generations in the long term.”

An overview of the DGB Pension Commission’s recommendations:
 

1. Securing the standard of living—two pillars support the pension system
The statutory pension insurance system remains the foundation. Its coverage level will initially rise to 50 percent and later to 53 percent before taxes. This means that retirees should receive at least 50 percent of their wages (after deduction of social security contributions, before taxes). The statutory pension is supplemented by a mandatory occupational pension plan (bAV) governed by collective bargaining agreements . Overall, the pension level is thus intended to reach 70 to 90 percent.

2. Recognize Care Work More Equitably
Pension entitlements for raising children can be divided between both parents in cases of shared caregiving. Caregiving work is also fully recognized while receiving a pension.

3. Strengthen Solidarity – Prevent Poverty
The basic pension supplement will be granted more easily and without taking income into account. It takes into account periods of reduced earning capacity and is supplemented by a general pension exemption in the basic income support program. Low pension entitlements will be topped up.

4. Ensuring Fair Financing
Slightly increased pension contributions and a higher federal subsidy will secure the pension level. A demographic subsidy will be financed through additional taxes on high net worth. Federal subsidies must not be cut for the purpose of budget consolidation.

5. Expand the Insured Population
New self-employed individuals without coverage, as well as members of parliament and members of the liberal professions (e.g., lawyers, doctors), will be included in the pension insurance system . This system will gradually evolve into an insurance scheme for the working population. Misincentives that discourage employment subject to social security contributions and the gender pay gap will be eliminated .

6. Preserving and Improving Pension Entitlements
The retirement age remains unchanged. Anyone who has completed 45 years of insurance coverage can continue to retire early without any reduction in benefits. People with health limitations will have better access to benefits. A partial pension without any reduction in benefits will be introduced for those working part-time due to illness.

7. Strengthening Rehabilitation and Social Participation
Prevention and rehabilitation will be more closely integrated. The reduced-earning capacity pension facilitates a return to employment subject to social security contributions. The so-called “rehab cap” will be eliminated .

A pension is not a gift

A great deal is at stake in the coming months: The federal government and the Bundestag must decide how the pension system will proceed after 2031. This is not simply a matter of math. It is about the fair distribution of prosperity, about good jobs, good wages, and good pensions.

“A pension is not a gift,” says Ralf Reinstädtler, Social Affairs Director at IG Metall. “Those who have worked hard throughout their careers deserve respect and predictability, not pension cuts.”

The DGB Pension Commission shows how we can turn the debate on retirement security on its head—and finally put working people at the center of the discussion.