Pension Fund Under Pressure: Contribution Rate Could Rise to Almost 20 Percent as Early as 2028

The financial situation of the pension fund is already strained. Last year, expenses of the statutory pension insurance exceeded income by around four billion euros. Total income had been estimated at 417 billion euros in the spring forecast.

Federal subsidies to the pension fund are expected to reach 110.6 billion euros in 2028. These subsidies from the state budget are intended to at least partially close the gap between income and expenses.

A significant cost driver is the legally guaranteed "Haltelinie" (holding line) for the pension level of 48 percent until 2031. This safeguard alone will cost around 3.8 billion euros in 2029 and would increase to 16 billion euros per year by 2040.

Holding Line and Mothers' Pension as Cost Drivers

Without further reforms, the pension level would fall to 46.8 percent by 2035. The holding line prevents this decline but significantly burdens the finances of the pension fund.

Another cost factor is the "Mütterrente III" (Mothers' Pension III) decided upon by the black-red coalition. It will amount to 5.1 billion euros in 2029. By 2040, these costs are expected to decrease to 4.1 billion euros as the number of eligible recipients gradually declines.

Demographic developments further exacerbate the pressure. Currently, there are around 17 million equivalent pensioners for 31.4 million equivalent contributors. By 2040, this ratio will shift to 29.8 million contributors and 18.7 million pensioners.

Demographic Change Worsens the Situation

The chairwoman of the Sozialverband Deutschland, Engelmeier, told the newspapers of the Funke Mediengruppe: "We know from surveys that people are willing to pay slightly higher pension contributions if they receive a good pension in old age in return."

The Sozialverband VdK Deutschland also pointed to the willingness of the population to accept higher contributions if stable or even better pension benefits are secured as a result.

The pension insurance regularly produces a spring forecast that projects key figures assuming the continuation of existing rules and laws. The current calculations show that deficits are threatening to become significantly larger in the coming years as the baby boomer generations retire.