Possible reform compromise – Madsen calls for pension equalization through fixed state contributions

Black and red have been arguing about pensions in the federal and state governments for months. Now Schleswig-Holstein's economics minister is bringing a "possible compromise" into play in the debate about the planned abolition of the tax-free pension after 45 years of contributions in a paper that is available exclusively to "Politico".

Reform summer, reform autumn and reform winter: Germany has been debating the black-red pension reform for over a year. The proposals presented by the Pension Commission in July have long been questioned from all sides. Especially with the new Minister for Labor and Social Affairs, Alexander Schweitzer (SPD), there are big question marks as to what will come of the originally planned reform and where there will have to be further negotiations. The focus is increasingly on the abolition of the pension without deductions after 45 years of contributions, as proposed by the Pension Commission.

Schleswig-Holstein's Economics and Labor Minister Claus Ruhe Madsen is now proposing a “possible compromise for the critics in the coalition and countries that reject deletion without replacement”. According to the CDU politician, the protective pension planned by the Pension Commission should be supplemented by “special financial recognition”. Anyone who has paid in for 45 years and continues to work beyond that should benefit from this initiative. This “special financial recognition” should be paid out “in the last 24 months” of working time, says Madsen’s position paper.

State pays pension contributions for “low wages”

Madsen's proposal should be financed by a fixed state contribution. “The federal government pays a fixed, pension-effective amount into the pension insurance,” says the paper. This is intended to pay out employees’ pension insurance contributions as “additional income”. According to Madsen's proposals, the employer's share of pension insurance contributions will not be covered by the state. It is important to Daniel Günther's (CDU) confidant that the state contribution to the pension is fixed and is not calculated as a percentage.

The state money for pensions should have a “progressive” effect, it says in the paper. In the case of low wages, the paid employee share of the pension should be “completely” eliminated, while in the case of high wages only “partially”. Madsen's proposal "costs more than abolition saves," the paper says. But in the long term the model costs “around a fifth of the savings.” Overall, the costs “remain constant because only two vintages are supported.”

The Economics Minister from Schleswig-Holstein calculates the concrete implementation with financial impact for employees, the federal budget, pension funds and the pensions of future generations using three different models. In one model he even imagines a completely tax-free additional pension income. The burden on the federal budget amounts to up to 1.89 billion per year.