Pension contribution could rise to almost 20 percent by 2028

The financing gaps in statutory pension insurance are growing faster than expected. Handelsblatt reports that the pension contribution rate could already rise to just under 20 percent by 2028 – significantly sooner and higher than previous forecasts had suggested. For an average earner, this means concretely: the pension contribution would climb from currently around 18.6 percent of gross income to almost 20 percent.

As Die Welt reports, pension expert Werding has calculated the impacts. For an employee with average income, this means an additional burden of several hundred euros per year – unless the government takes countermeasures. The pension insurance itself has updated its forecasts through 2040, thereby showing how dramatic the development could be.

Pension guarantee strains public budgets

The causes are well known: the population is aging, fewer working-age people are paying in for more retirees. Die Zeit documents that the so-called pension guarantee of the federal government – that is, the promise that the pension contribution will not exceed 20 percent – incurs considerable costs. This guarantee obligates the state to cover pension fund deficits, which strains public budgets.

By 2040, the situation will worsen further. Der Tagesspiegel shows that without reforms, contribution rates could be significantly higher. The government is under pressure: either it raises pension contributions, increases tax subsidies, cuts pensions, or raises the retirement age – or it combines several of these measures.

Reform plans possibly insufficient

The new figures from pension insurance make clear that previous reform plans may not be sufficient to close the financing gaps. For employees and employers, this means: the burden from pension contributions will rise significantly in the coming years if the federal government does not act quickly.