DIW President Marcel Fratzscher welcomed the pension package as a “good step in the right direction”. “The federal government’s pension package is a good step in the right direction, but it is still insufficient to stop the increase in old-age poverty,” Fratzscher told the “Rheinische Post”. “Stabilizing the pension level at 48 percent is the right priority. The increase in contribution rates means a significant additional burden for companies and employees, but should be bearable for most,” said the head of the German Institute for Economic Research (DIW).
“Linking the statutory pension to the development of wages – and not just inflation – is a positive element of the pension package. The decision not to further increase the retirement age is understandable. However, the retirement age urgently needs to become more flexible in order to enable more people to work for longer, to relieve the burden on the pension system and to somewhat alleviate the problem of skilled workers,” said the DIW President. “The biggest weakness of the pension package is the inadequate protection against poverty in old age. The pension package is a missed opportunity to strengthen and expand the basic pension,” said Fratzscher.
IW boss Michael Hüther, however, has questioned the federal government’s forecasts for financing pension levels. “In 2035, with a net return – after deducting loan costs – on generational capital of three percent, it would need 223 billion euros to achieve the government’s forecast contribution rate of a good 22 percent,” said Hüther to the “Rheinische Post”.
“The net return of three percent is extremely ambitious,” said the director of the German Economic Institute (IW). “This year, the Generation Capital Foundation is expected to receive 12.5 billion euros; with the same rates, in 2035 there would be just 177 billion euros in the depot,” said Hüther.
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