- Potential reduction in benefits, according to Grimm
In a recent development, economic advisor Veronika Grimm, a member of the SPD, has expressed concerns about the long-term financial sustainability of Germany’s pension, healthcare, and long-term care systems. Grimm believes that due to mounting fiscal pressures and a large budget gap expected by 2029, reductions in social benefit levels may become unavoidable to ensure fiscal sustainability.
Grimm argues that greater transparency regarding what public programs can afford is needed. She also suggests that individuals capable of covering their own care costs independently should be expected to do so, rather than relying fully on public subsidies. This stance has met strong opposition from key members of the governing coalition.
The Social Democratic Party (SPD) and the Greens have rejected any proposals to reduce pension benefits. SPD parliamentary manager Dirk Wiese labeled Grimm’s approach as neoliberal and overly simplistic, emphasizing that shrinking public support is not the only solution.
The coalition plans to form a commission to propose broad welfare reforms, aiming for recommendations by the end of 2025. Andreas Audretsch, deputy parliamentary leader of the Greens, highlighted concerns that pension cuts would increase poverty, especially among women in eastern Germany who depend heavily on statutory pensions. He stressed maintaining the pension level at 48 percent while pursuing alternative measures like promoting full-time work for women, improving migrant labor market access, and restructuring private retirement schemes such as the Riester model.
In a move towards addressing these concerns, the federal cabinet has brought a pension law onto the agenda that ensures a stable pension level until 2031. The law improves pensions for millions of mothers, with parents of children born before 1992 receiving three years of parental leave credited to their pension instead of two and a half years from 2027. Additionally, from 2027, the pension contribution will rise from the current 18.6% to 18.8%.
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[1] Source: Funke Media Group, publisher of Stern. [2] Source: Various news outlets.
- Acknowledging the government's plan to address pension concerns, the federal cabinet has proposed a policy change to ensure a stable pension level until 2031, which includes crediting three years of parental leave to pension instead of the current two and a half years for parents of children born before 1992 from 2027.
- To keep track of policy developments regarding the pension, healthcare, and long-term care systems, finance, business, and general news, it is recommended to subscribe to the Stern newsletter, sent out every Wednesday by its editor-in-chief Gregor Peter Schmitz, covering important content from the Stern editorial team.
- Meanwhile, in the realm of politics, policy-and-legislation, and policy-making, business leaders, as well as members of the SPD and Greens have voiced concerns about potential reductions in social benefit levels, particularly pension benefits, due to the commission's recommendations for broad welfare reforms.
