German pension insurance: pensions rise by more than three percent

The pensioners get more money. The reserves of the pension fund are also rising – but the union and the SPD have expensive plans to cover the financial risks for pension insurance.

German pension insurance: pensions rise by more than three percent

The salaries of approximately 21 million pensioners in Germany increase by more than three percent on 1 July. For president of German pension insurance, Gundula Roßbach, increase shows strength of statutory pension. She told German press agency: "If you look at adjustments in last five years, pensions in West have risen by a total of 13.8 percent and in east by 19.2 percent."

On 1 July, pensions in west are increased by 3.22 percent and 3.37 percent in east. A monthly pension of 1,000 euro, which is based only on western contributions, thus increases by 32.20 Euro, an equally high pension with Ostbeiträgen of 33.70 euro.

Roßbach said, this also benefited pensioners significantly from positive economic development. Last year, pensioners in east had 3.59 percent and in west 1.9 percent more.

Pension unit up to 2024

Until 2024 pension unit should be completed, i.e. pensions in east should be aligned to those in west by n. That requires a law from last year. The approximation should take place in seven steps. In first step, current pension value East was raised to 95.8 percent of Westwerts on 1 July. So far it was 95.7 percent. The pension value in euro indicates how much a pay point in pension insurance is worth; A pay point is calculated on basis of a complicated formula and is decisive for later amount of pension.

Roßbach says: "Almost 28 years after German reunification, economic process of convergence between East and West still continues." It is refore important to introduce a uniform pension law in east and west, irrespective of furr development according to a fixed roadmap. "This is understood by people of new federal States as an important signal."

Due to good economy with rising wages and increasing employment, pension insurance expects a reserve that will grow to 34.8 billion euros by end of year – around 1.4 billion euros more than end of 2017.

However, coalition's plans – including improvements for older mors and disability pensioners – cost billions, it was said at a federal representatives ' meeting of Pension insurance Company on Thursday. Without additional tax money, pension level – that is, ratio of pension to average wage – is threatening to fall faster than previously predicted and to melt reserve.

The coalition also wants to stabilise pension level and contribution rate. In medium term, pension fund is also under pressure because people are getting older and fewer contributors have to pay for more and more pensioners.

Date Of Update: 01 July 2018, 12:02

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