The problem of paying retirement pensions and Social Security benefits worries not only retirees but also experts. Economists like Gonzalo Bernardos already warn of the raising taxes to pay pensions “while new retirees earn an average of close to 2,000 euros.” Germany is ahead of all these forecasts and, given the increasing aging of the population, has announced a curious initiative.
In September, during an official CDU event, Chancellor Friedrich Merz announced that the welfare state “is not financially sustainable” and, given the crisis in the pension system, he proposed paying a salary of 10 euros per month to children and adolescents from 6 to 18 years old. This money, deposited into their bank accounts, would be an ‘investment’ for what could be considered a pension plan.
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And it is a position shared by other economists such as Manuel Álvarez, who also worked for Social Security, who assured that the ideal is to start saving for retirement before the age of 30, “from the first salary.”
As reported BBCthe intention is “not to depend on the pension system, to save over a long period of time to guarantee the collection of a secure retirement pension.” These words of the chancellor have already had the first reactions from the metal workers’ union who reproach him that instead of paying this amount to children, the Government should focus on strengthening the public pension system.
It is not help for families, it is a ‘pension plan’
What Germany is proposing is not financial aid for families, but something similar to an investment fund or a pension plan. The pension system in this country, as in Spain, is based on the contributions of active workers, and they are the ones who finance the retirement of the elderly. The problem is that more and more workers are retiring and the entry of young people into the labor market is slower.
For every 100 contributors, there are about 40 pensioners and the aging of the population will cause this figure to continue increasing. The Merz (Frühstart Rente) plan consists of depositing 10 euros per month into an individual account for each minor between 6 and 18 years old. The money would go to variable income funds, so that the benefits of these savings serve to complete the public pension.
It is not a salary nor a subsidy, but a savings plan. In this way, thousands of minors and their families can be educated in investment and savings. As a plus, this money is tax-free although, yes, it will not be accessible until retirement age is reached.
Increase in the retirement age to 67 years in 2031
In Germany, one of the measures proposed to improve workers’ retirement is the increase in the retirement age, which will be 67 years in 2031. Currently, it is 66 years and the option that it could be 68 years later has not been ruled out.
Seniors who combine employment with a retirement pension will be able to continue contributing, so this would be another incentive and the increase in the pension capital fund is also contemplated, with the idea of reaching 200,000 million euros in order to stabilize contributions.