Pension Securing your standard of living in retirement: How the Soli-Rente Plus works

The statutory pension must play a significantly greater role in securing people’s standard of living than it has in the past. It must ensure adequate retirement benefits for everyone. IG Metall is therefore advocating for a reform of the pension insurance system.

However, even with significantly improved benefits, the statutory pension will not be able to guarantee everyone the standard of living they have achieved. Supplementary retirement savings are therefore essential—especially for employees who cannot benefit from a good employer-funded retirement plan.

What can be done?

IG Metall has developed an idea to improve retirement benefits—within the statutory pension system itself, without the need for expensive private retirement plans. The idea is called “Soli-Rente Plus.”

The basic concept behind Soli-Rente Plus is simple: During their working lives, employees pay additional money into the statutory pension system, on top of their regular pension contributions. This increases their pension entitlements. When they eventually retire, they’ll have more money in their pockets every month.

“The once-promising supplementary pension schemes, such as the Riester pension, have failed,” says Hans-Jürgen Urban, executive board member of IG Metall. “Moreover, private retirement products are at the mercy of the financial markets, which remain stable only as long as they don’t crash again. We need alternatives—and these can be found in the solidarity-based and crisis-proof statutory pension insurance system.”

How can the Soli-Rente Plus be implemented?

The foundation of the Soli-Rente Plus is already a reality. Even today, insured individuals can voluntarily pay additional contributions into the pension fund. The purpose of this option:

• Retroactive pension coverage for periods of vocational training completed before the age of 45.
• Compensation for reductions in benefits due to early retirement (if you decide to work until the regular retirement age, your pension will simply increase).

As a rule, the pension insurance system accepts voluntary contributions starting at age 50 to offset reductions in benefits. A legal opinion commissioned by IG Metall has shown that, under current law, contributions made before the age of 50 may also be justified. IG Metall is advocating for everyone to have the right to make additional contributions even before the age of 50. Of course, these payments must be voluntary.

What are the advantages of the Soli-Rente Plus over private retirement planning?

The Soli-Rente Plus can close gaps in retirement coverage simply and efficiently. A major advantage is that there is no need to establish a new organization or launch a new fund. The statutory pension insurance system already exists. At 1.3 percent, the administrative costs of the statutory pension insurance system are unbeatably low.

Furthermore, the pension insurance system is not designed to generate profits. With the Soli-Rente Plus, therefore, there is no need to help finance broker or distribution costs, as is the case with private pension products.

The prospects for the growth of the money contributed are solid: Model calculations commissioned by IG Metall show that an average annual return of around three percent in real terms is realistic through 2063. This is because the growth of the statutory pension depends on wage trends rather than on financial market developments or corporate returns. A stable and socially responsible alternative for supplemental retirement savings.

Will the additional contributions actually benefit me in the end?

The increase in pension benefits resulting from voluntary additional contributions depends on two factors: the amount of the additional contributions and the duration over which they are paid. That is why it is also important to IG Metall that people be able to make additional contributions before the age of 50, if possible.

Another key factor is that employers should also contribute to these additional payments—for example, through collective bargaining agreements. If, for instance, an employer is required by a collective bargaining agreement to contribute to voluntary additional payments into the statutory pension insurance system, pension gaps or pension reductions can be significantly reduced over the period leading up to retirement.

Are there already collective bargaining agreements in place for additional contributions to the pension insurance system?

Yes, there are now many collective bargaining agreements that provide for employer payments to offset pension reductions. One example is the collective bargaining agreement to offset pension reductions in the plumbing, heating, air conditioning, and metalworking sectors in Lower Saxony.

The collective bargaining agreement states: Every employee aged 50 or older has the option to make a monthly additional payment into their pension account. If the employee pays at least 50 euros per month, members of IG Metall are legally entitled to a monthly additional payment from the employer in the amount of 50 euros as well.

Is the “Soli-Rente Plus” intended to be an alternative to occupational pension plans?

No, the Soli-Rente-Plus is not an alternative or even a counter-model to occupational pension plans (bAV). Employer-funded occupational pensions are still needed for everyone: with guaranteed minimum benefits, employer liability, and grandfathering provisions for existing plans.

Good occupational pension plans thus remain a core element of supplemental retirement planning. Currently, however, by no means all employees in IG Metall’s sectors are entitled to a good occupational pension plan. The Soli-Rente Plus can be particularly effective where an occupational pension plan is lacking.

Why should employers participate in the Soli-Rente Plus?

For employers, the Soli-Rente Plus is a simple way to offer employees additional retirement security. They would only need to contribute a regular amount and would otherwise not have to worry about anything. The pension insurance fund handles the administration.

As an incentive, the employer’s additional pension contributions should be tax- and contribution-free .

What do employees think of Soli-Rente Plus?

The vast majority of people in Germany want to strengthen the statutory pension insurance system. This is shown by a representative survey commissioned by IG Metall.

Sixty-seven percent of those surveyed are willing to pay slightly higher pension contributions to ensure an adequate pension. Seventy percent consider voluntary extra payments into the pension fund to be a good option. However, many are calling for employer participation.

Hans-Jürgen Urban’s conclusion: “A ‘Soli-Rente-Plus,’ as called for by IG Metall, is feasible, it pays off, and it can help strengthen the statutory pension system and the welfare state.”