Payments from the federal budget to pension insurance absorb an ever larger share of tax revenue. In addition to the controversial pension package from the black-red coalition from the end of 2025, the now planned, but again controversial, new pension reform also contributes to this. Under unfavorable circumstances, almost half of all federal tax revenue could be used for pension spending in 2040. Currently it is around 30 percent. This is shown by a new report from the Federal Audit Office to the Bundestag Budget Committee. It lies with the F.A.Z. before.
The official auditors are primarily warning against attempts to weaken the reform package recommended by the Pension Reform Commission at the end of June and then shift follow-up costs into the federal budget. This is probably aimed not least at the increasing resistance to the planned exit from the zero-deduction early pension for insured people with 45 years of contributions, for which contributors have so far paid more than ten billion euros annually.
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The Court of Auditors does not explicitly address the so-called pension from the age of 63. However, he notes that the pension commission's plans “lead to burdens for everyone involved”: contributors, pensioners and the household. “If some burdens are reduced, attention must be paid to ensuring that the federal budget is not further unilaterally used,” the report warns.
210 billion euros for the first pension package from the end of 2025
First, he shows how much the 2025 pension package will put a strain on the budget. On the one hand, this switched off the demographic factor until 2031, which would cause pensions to rise more sharply. On the other hand, it increases the so-called mother's pensions once again. The former triggers additional spending totaling 145 billion euros by 2040, the latter a further 65 billion euros. In order not to place an even greater burden on contributors, the pension fund should receive additional federal subsidies.
The Court of Auditors uses the so-called tax revenue ratio to examine the extent of the burden on the budget. This indicator indicates what proportion of federal tax revenue flows into the pension fund. Without the 2025 package, it would have gradually increased from 29 percent to 32.7 percent by 2040. According to the latest figures, it increases to almost 37 percent. As early as 2030, the federal government will have to pay 155 billion euros to the pension fund, 15 billion euros more than previously expected.
Federal funding currently amounts to around 120 billion euros. They should actually be higher, but because of its financial difficulties the government has cut subsidies to the pension insurance system. So far this has worked without any visible consequences because the contribution fund still has financial reserves from good times. But these will run out next year. According to this, the pension contribution rate for employees and employers must increase from the current 18.6 to almost 20 percent of gross wages.
Delaying the capital pension would be extremely dangerous for the budget
It is more difficult to estimate what the planned new pension reform means for the budget, because it also depends on the development of the stock market: The package includes a pension increase guarantee beyond 2031, which in the longer term is to be financed solely through the capital pension, which is also planned. Initially, however, the federal budget would have to step in. Whether and to what extent depends on the investment success of the capital annuity. If things go unfavorably, the tax revenue ratio would have to rise to 45.5 percent by 2040, as the Court of Auditors shows.
In addition to poor stock market prices, a politically delayed start to the new capital pension could also exacerbate the budget crisis. If the controversial “pension from age 63” were not abolished, this would initially result in higher burdens for contributors. At the same time, however, a new additional contribution of two percent of gross wages should quickly be levied for the capital pension. If its introduction were postponed due to pressure from excessively high contribution rates, then the capital pension would not be able to fulfill the planned pension guarantee, even if the stock market prices were good. And the federal budget would have to cover the higher pension subsidies.
However, according to the report, the Federal Ministry of Labor is opposed to measuring the budget burden by the tax revenue ratio. This key figure does not clarify whether pension expenditure is too high or tax revenue is too low. However, the Court of Auditors insists on its warning. “The effect of crowding out other important spending, such as public investment, is the same,” he writes. Pension expenditure cannot be moved arbitrarily into the federal budget in order to protect pensioners and payers.
