Children born or resident in Germany will receive an allowance from the government. From 2027, anyone who turns six will receive 10 euros per month (R$57) until they turn 18. Parents, grandparents or guardians will be able to contribute to increase the cake, as will the beneficiary when they are adults. Detail, the accumulated value can only be accessed upon retirement.
The "Frühstartrente", something like an early start pension, is the most unusual part of a broad social security reform that the country has been discussing since last year. The mechanism was approved last Friday (16) in Parliament, the Bundestag, and still needs to pass through the Upper Chamber, the Bundesrat.
Nothing indicates that the project will face problems in the House, made up of representatives from the 16 federal states, an exception compared to other points in the package.
The main item of the reform is to supplement the distribution, similar to that of Brazilian Social Security, with capitalization — a change also discussed in Brazil. The basis is the successful Swedish model, in which part of the resources is invested in the capital market to support the system.
The pension deficit is manageable for now, and the government only covers non-contributory benefits. The problem lies in the future: the burden on the federal budget is growing, jumping from 33% to 45% of tax revenue in 2040, according to government data.
Capitalization in general has received support or, critically, the reservation that it is already late. The most complicated thing is cutting acquired benefits, such as the possibility of starting retirement at 63 years old, when the minimum age in the country is 67 years old.
This specific debate became the subject of election campaigns last month, when the CDU, Prime Minister Friedrich Merz's party, reaped terrible results.
In any case, the early-start pension is just complementary — a cheap way of inducing savings and, in the Merz government's assessment, financial education among the population.
The opposition disagrees, seeing the instrument as increasing inequality, given that a large part of the gains will depend on contributions from parents with budget space.
HOW WILL THE SYSTEM WORK?
In fact, those largely responsible for the magic are compound interest and the long contribution period of almost six decades.
For children born from 2020 onwards, the government will deposit 10 euros a month into a collective savings fund. The money will be partially invested in the stock market, the practice in developed countries, with average gains estimated at 6% per year.
If families want to contribute to their children's early pensions, specific accounts for this purpose must be opened and will absorb the government's allowance. There will be a contribution ceiling of 6,840 euros per year (R$38,988), given that such accounts will operate under a special regime, such as tax exemption until retirement and lower rates.
After beneficiaries turn 18, the game continues without government assistance. If the citizen does not open an account until they turn 35, the amounts return to the Treasury. With the account working, the resources will be available for withdrawal from the age of 65.
The performance of all of this depends on the variables used to calculate it. One of the calculators created by the German press shows that, with an average annual income of 6.1% and discounting the estimated inflation for the period, voluntary contributions dictate the size of the value achieved in retirement. The accumulated total would be:
13,200 euros (R$75,420), only with a monthly contribution of 10 euros from the government until the age of 18;
132,000 euros (R$752,400), with a contribution from the government and an additional 100 euros per month (R$570) from parents until the age of 18;
329,200 euros (R$1,876,440), if the contribution of 100 euros continues monthly after age 18.
According to the government's calculations, with 53 thousand euros (R$302,100) reached upon turning 65, it would be possible to add 200 to 300 euros per month to the regular amount of the official pension (around 1,500 euros). In theory, this would restore the purchasing power of pensions in Germany, currently seen as insufficient to meet the basic needs of retirees.
One caveat is that the system does not have any type of guarantee or minimum income stipulated. If the stock market falls due to a crisis or war, for example, it takes your savings with it. Experts, however, consider that the accumulation period of almost six decades is long enough to dilute such impacts.
CRITIQUES AND OTHER EXAMPLES
Stefan Schmidt, from the Green Party, who voted against the early start pension, declared that the system will only make a difference to "those who were lucky in their parents' lottery". According to the parliamentarian, those who cannot count on extra contributions, probably the case of poorer families, will receive a very modest additional during retirement.
Criticism aside, there are those who see potential in the German system. The Luxembourg government, equally affected by the demographic challenge of an aging and shrinking population, announced its intention to develop a similar project in the country.
Stimulating savings is not exactly new, as is the discontinuation of programs aimed at children, as occurred in the United Kingdom. One perennial model is Singapore's Child Development Account, where each baby gets an account with an initial deposit at birth. The government doubles family contributions up to a certain limit, and the money can be used for education, health, pension funds and housing.
