- The Corona pandemic renders the German government’s optimistic economic assumptions on which the forecast of the pension contribution rates and the benefit level until 2025 are based, obsolete. Due to short-time work and rising unemployment looms a shortfall of at least EUR 8bn.
- With pension cuts prohibited by law, an increase of the contribution rate can only be avoided by depleting the sustainability reserve faster than planned.
- Against the background of the accelarating aging of society, it needs sufficent capital buffers and further pension system reforms.
In the tailwind of a favorable economic environment and the retarding aging of society, the German government has in recent years not only granted generous new pension benefits but promised also to keep the pension level stable at 48% and the pension contribution rate below 20%, at least until 2024. In fact, in the last autumn’s mid-term estimate, the government was optimistic that the contribution rate could be held stable at 18.6% until 2024. However, this calculation was based on the assumption that the average number of unemployed would remain at around 2.3mn per year and the average contributory salary in the old federal states would increase by 2.7% this year and next year and by an average 3.0% between 2022 and 2024. The respective assumptions for the wage development in the new federal states were even 0.2 percentage points higher. Furthermore, it was decided to decrease the sustainability reserve gradually from a comfortable EUR 40.5bn at the end of 2019, which corresponded to the expenses of 1.8 months, to a mere 9.3bn or 0.3 monthly expenses until the end of 2024.
Figure 1: Main assumptions of the mid-term estimate, autumn 2019
 Net before tax.