The SPD is outraged by the Chancellor’s pension statements, yet it’s long been clear that the statutory pension will only provide basic security. A solution already exists: it comes from Christian Lindner.
One can sometimes only wonder about the SPD. “If the Chancellor wants to reduce the statutory pension to a basic pension, he will face the bitter resistance of social democracy,” trumpeted SPD General Secretary Tim Klüssendorf this week.
The occasion was an appearance by Friedrich Merz at the Banking Association, where Merz had stated that the “statutory pension alone” would “only be basic security for old age.” For a good life in retirement, stronger occupational and private provisions would be necessary, “and to a much greater extent than we currently largely have on a voluntary basis.”
There was quite a stir in the SPD. Criticism rained down from everywhere, with accusations that the Chancellor was dividing the country, acting irresponsibly, and stoking “fears.” They attacked him with great force!
This seems a bit absurd when you briefly look at the responsible ministers of the last almost 30 years: There was Walter Riester from the SPD, who introduced state-subsidized private old-age provision in 2002, which still bears his name. He was followed by Ulla Schmidt, also from the SPD, who implemented and initiated numerous pension reforms during her term – always with the justification that the statutory pension would eventually be insufficient to secure the standard of living in an aging society. Then there was Franz Müntefering, also SPD, who pushed for the pension at 67 – with the justification that people would have to work longer to earn a halfway decent pension in old age.
Merz’s Realization is Old News
The realization that the statutory pension will no longer suffice to extend the standard of living from working life into retirement, but that it can only serve as a form of basic security (because otherwise it will simply become too expensive given the number of pensioners), is at least 30 years old and was significantly incorporated into concrete laws by SPD ministers.
The list extends to Lars Klingbeil, the current Finance Minister, Vice-Chancellor, and co-SPD leader. It was Klingbeil who, just a few weeks ago, initiated an important reform of private old-age provision: the new pension savings account, with which employees will also be able to save for old age with state support from 2027 onwards using ETFs and low-cost investment funds. Finally! This Lars Klingbeil also stated recently in a major reform speech: “The state has a protective function. It will exercise it. (…) But we are overtaxing ourselves if every risk and every possible problem ultimately has to be regulated by the state or solved with taxpayer money.” He is right!
And now, back to SPD General Secretary Klüssendorf: There could have been many intelligent answers to Merz, even from a social democrat’s perspective – hypocrisy is not one of them.
In fact, Merz’s argumentation has a gap, which we at Capital have often addressed: More private provision is right and important, as is an expansion of occupational pensions. You can find out how to ideally calculate how much you should set aside for retirement here. And how to invest the money sensibly, my colleagues explain here, for example.
But for the increasing problem of poverty in old age, because too few people, despite all the reforms, did not want to or could not save enough privately (and still can’t), more stock savings won’t help much in the next five years. Various federal governments should have tackled this problem more decisively 15 or 20 years ago, for example with faster corrections to the Riester pension. But neither the SPD nor the Union dared to do so for 20 years.
As bitter as it is, for those who are now approaching retirement at the end of their 50s or beginning of their 60s and, especially with a low income, cannot count on private additional income in retirement from stocks or rental income, three or five years with a fund savings plan will probably not help much. (If you can afford it, please do it anyway!)
No, the problem that a large number of people in Germany with low earnings and broken employment histories are heading towards a pension that will be insufficient or barely enough to live on is acute. It is – not solely, but also – the result of a policy that has primarily pursued pension policy for those who are actually doing well and are well provided for. The keywords here are: pension at 63, pension level guarantee, mothers’ pension. All measures that were expensive and will continue to cost money, and which primarily benefit those who already have a lot. They are the opposite of social policy that cares for the truly needy – but they overburden the state today to do what is truly necessary. This finding, which politicians like Klüssendorf will of course dispute at length, only makes their hypocrisy about Merz even more bitter.
Lindner’s Generational Capital Addresses the Right Issue
Interestingly, there was and is a solution to the problem of insufficient private provision for many older employees who could hardly afford private savings for old age. It comes, like the pension savings account now managed by Klingbeil, from his predecessor Christian Lindner – that is, precisely from the FDP circle: Before the collapse of the traffic light coalition, Lindner had tried to anchor the “Generational Capital” in the federal budget. The idea: The statutory pension insurance should also receive its own, capital-backed pillar and finance part of pension expenditures from future stock gains and dividends.
To quickly build up this pillar, Lindner’s draft proposed that the federal government transfer 10 to 12 billion euros annually to a state institution so that it could invest the money worldwide on the capital market. To raise the money, Lindner, an avowed debt opponent, even wanted to take on additional debt – after all, the loans would eventually be offset by a new capital stock whose returns would likely significantly exceed the additional interest costs. A new German sovereign wealth fund to finance or supplement statutory pensions.
The approach was never implemented. But it was new and interesting. And it would be worth considering again now to really address an acute problem – and not just to throw the usual rituals of outrage at each other.
If Merz is serious about his call for stronger capital backing in old-age provision, he should give the idea another chance in the coming months. That would have been the right answer from the SPD as well. There is even a place and a date to revisit the idea: by the end of June at the latest, an expert commission of the government will present its ideas for reforming old-age provision. It would be a surprise (and a missed opportunity) if this idea did not reappear in the recommendations.
