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Retirement as a campaign issue

Kay-Alexander Scholz / wgAugust 1, 2016

Affording the golden years could be a hot topic in Germany's coming federal election, as many aging adults in the country look toward their retirement with growing concern.

Deutschland Symbolbild Hartz IV Armut Altersarmut
Image: picture-alliance/dpa/K. Hildenbrand

Current retirees in Germany have it good. Those between 70 and 90 are profiting from the country's growth years between the 1960s and 1990s: unemployment wasn't an issue, the real estate market was strong, livelihoods were secure and savings were healthy. The average German could rely on a solid pension; many companies offered their own, as well. Even those from former East Germany saw an increase in their comparatively meager retirement.

Now the party has come to an end.

Decreased prosperity

The German pension system came into effect under Germany's first chancellor, Otto von Bismarck, in the 19th century. It was designed so the young paid for the old, and employers paid a share. An aging demographic and increased lifespan has meant the young have had to support more and more of the elderly population.

Pension payment levels were lowered in the 1980s to ease the burden on workers. That's been the case ever since, regardless of the party in power. Tax-free allowances are also sinking each year, meaning a retiree in 2025 will have far less than a retiree in 2010. Private pensions, though more strongly supported through tax incentives since 2000, have been yielding smaller returns in this time of low interest rates.

Real estate, long a stable retirement tool, is also suffering, at least in the countryside. With more people moving to cities, homes in rural areas are going unsold. Meanwhile, many workers have experienced bouts of unemployment or been forced into low-wage jobs.

Pensions a popular topic of conversation

Pensions are generally coupled with rising wages -- increasing from 4 to 5 percent this summer. In the early 2000s, however, there were years of no growth. That has led to a below-average public pension level, according to the OECD. Austria is 50 percent higher, for example. Retirement age in Germany has long been 67, whereas French and Hungarian workers can start retirement earlier.

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Growing concern that the coming generation may face a worse financial situation than the current one puts retirement in play for the upcoming federal election. This is particularly good for the traditional social parties, which have suffered a loss in popularity and can score political points with pension problems.

Merkel's view

The government coalition between the Social Democrats (SPD) and Angela Merkel's conservative CDU/CSU agreed to a "solidarity pension" that would buttress the retirement of those receiving below-average pensions despite their long employment.

The two parties additionally agreed to a balancing of East and West pensions, which Merkel referred to in her summer press conference. Due partly to lower wages, workers in the East still receive a pension that is about 10 percent smaller. The gap has closed since Germany's reunification, but not completely. Labor and Social Affairs Minister Andrea Nahles wants to present a plan in the fall.

Stabilize pension levels

A debate over pension levels is gathering steam. By 2030, pension levels may drop from 48 to 44 percent. The SPD and labor unions see a problem with that, and so too does the Bavarian sister party of Merkel's Christian Democrats (CDU), the Christian Social Union (CSU), which was arguing for an increase in pensions for mothers in the last election.

Frank Bsirske, head of the major labor union ver.di, has demanded stabilizing and then raising the pension level. Up to 12 million workers are at risk of retiring in poverty and this is a "ticking social time bomb," he said. The planned support for low pensions isn't sufficient, he added. IG Metall, the major metalworkers union, has already put forward a plan. The German Trade Union Confederation (DGB) announced they want to see a change in course before the Bundestag election.

Additional retirement issues won't be discussed until fall 2017, Merkel said.