The cornerstones quickly explained – fight against old-age poverty


The coalition has agreed on a compromise on the basic pension. Low pension entitlements are to be increased and the company and private pension plans strengthened. The points in detail.

Income test instead of means test – that is the compromise formula with which the leaders of the CDU, CSU and SPD want to end the months-long dispute over the basic pension. This low-income earners should be spared the transition to social welfare, if they have at least 35 years of contributions in the pension insurance. An accompanying package provides for measures to strengthen occupational and private pensions. As an economic stimulus, the contribution to unemployment insurance will be reduced to 2.4 percent and an investment fund for future technologies will be launched.

The details of the agreement have yet to be turned into a bill, approved by the Cabinet and adopted by the Bundestag next year.

Old-age poverty

At the end of 2018, according to the Federal Statistical Office, a good 559,000 people were dependent on basic security in old age. That's a good three percent of all retired. Studies suggest that about three times as many older people are entitled to social assistance benefits because of their low income, but they are not entitled to social assistance because of shyness or shame. According to the statistics office, older people currently need around € 800 a month to live and live in order to make ends meet.

ground rent

According to the agreement of the leaders of the CDU, CSU and SPD, it "should also make a contribution to the protection against old-age poverty". Anyone who has worked should have more in old age than the basic security. The coalition wants to acknowledge the life achievement of people "who have worked for decades, raised children and cared for relatives." It is to be introduced on 1 January 2021 for existing and retirees.

Amount of the basic pension

The basic pension is a supplement to the pension entitlements of low earners, who have 35 years of contributions through work, child rearing or care. They are almost as if they had worked for 80 percent of an average wage in those 35 years.

In detail, it looks like this: Your contributions to the pension fund must be between 30 and 80 percent of the payments of an average earner. Their pension entitlement is then doubled for 35 years, but not more than 80 per cent of the pension that an average earner earns in those years. Of the pension supplement still 12.5 percent are deducted. Thus, the coalition wants to uphold the so-called equivalence principle, according to which the pension actually depends on the amount of contributions.

Income tax allowance

The coalition wants to prevent people from receiving the basic pension, even though their livelihood is backed up by other sources of income. Up to a monthly income of 1,250 euros for single persons and 1,950 euros for couples, the basic pension is paid in full. The basis for this is "the taxable income plus the tax-exempt portion of the pension and all capital gains".

The form in which life insurance payments are taken into account should be clarified during the legislative procedure. The basic pension should be unbureaucratic: The income adjustment should be automated by an electronic data exchange between the pension insurance and the tax authorities.

Allowances for basic security and housing benefit

The housing allowance will be introduced in an amount of about 80 million euros, so that an improvement in the basic pension is not offset by a reduction in the housing allowance. For retirees with 35 contribution years, a basic allowance is introduced in the basic insurance, up to which pension payments are not deducted from the basic pension. Similar things already exist for income from occupational and private pensions. The allowance amounts to 100 Euro per month plus 30 per cent of the additional pension payments – at the most, however, up to half of the basic basic insurance rate, currently € 212.


The costs of the basic pension as well as the allowances in the basic security and the housing allowance "are financed from taxes and without increasing the contribution in the pension insurance". The federal subsidy to the pension fund will be "increased accordingly". The costs are not quantified. CSU boss Markus SOder spoke of 1.1 to 1.5 billion euros. An important contribution to this is the "agreed financial transaction tax".

Contribution rate to the unemployment insurance

The unemployment insurance contribution rate will be reduced temporarily to 2.4 per cent of the gross salary by 2022. Together, employees and employers will be relieved of around 1.2 billion euros annually. The contribution had already been reduced by 0.5 points to 2.5 percent earlier this year.

Strengthening occupational and private provision

The coalition agreed on a series of measures to strengthen occupational and private pensions:

  • Beneficiaries of occupational pensions or capital benefits of company pension plans are exempted from contributions to the statutory health insurance fund. So far, they have to pay the full contribution rate of 14.6 percent plus additional contribution, while the pension is only half the contribution rate due – as for employees in working life too. The coalition wants to create an allowance of 155.75 euros per month for such pensions. Thus, it is achieved that about 60 percent of pensioners "de facto paid a maximum of half the contribution rate" on their total pensions, while the other 40 percent "noticeably relieved" would.

For health insurances, however, this means lower revenues of about 1.2 billion euros annually. This is to be financed "completely from means" of the legal health insurance. In the years 2021 to 2023, amounts of 900, 600 and 300 million euros are to be withdrawn from the liquidity reserve of the Health Fund.

  • For employers, there should be an incentive to offer employees with a monthly gross salary of up to 2,200 euros an additional employer-financed company pension scheme. The government subsidy of up to 144 euros paid so far should be doubled to 288 euros.
  • The tax-free allowance for employee participation in working capital should increase from 360 to 720 euros.

investment Fund

At the Kreditanstalt fur Wiederaufbau, a "participation fund for future technologies" will grow up to ten billion euros.

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