The financing of the basic pension remains a vacancy

Politicians from the CDU and CSU have sharply criticized the revised draft of the basic pension. There are objections to several details.

Health Minister Jens Spahn and Labor Minister Hubertus Heil in Berlin.

Dhe basic pension for low-wage earners planned by the coalition is not yet in the towel. Many Union politicians expressed sharp criticism on Friday of the revised draft law that Federal Labor Minister Hubertus Heil (SPD) had sent to the other ministries on Thursday. There are objections both to the details of the income test and to the unclear financing. Federal Minister of Health Jens Spahn (CDU) reportedly wants to report concerns in the departmental vote.

This means that Heil’s plan to get the draft law through the cabinet on January 29th will no longer work. According to his new design, 33 years of work, child-rearing and caring activities should be enough to receive a contract. A total of 1.4 million pensioners should receive it in the future. In the first year of 2021, Minister Heil expects costs of around 1.4 billion euros, which will then rise continuously over the next few years.

Financing not yet clarified

Financing remains a central void. The draft law only mentions that the federal subsidy – i.e. the tax subsidy for pensions – should be increased. Heil wants to use funds from the planned financial transaction tax, but its introduction is uncertain. As it is rumored in Berlin, Finance Minister Olaf Scholz (SPD) is now thinking of introducing it without further European partners if necessary – which, however, is likely to meet with massive resistance from the coalition partner. For years, the German government has been working on introducing the new tax on financial transactions with nine other member states as part of increased cooperation. But there is great skepticism in Brussels that this will still be possible.

The social policy spokesman for the CDU / CSU parliamentary group, Peter Weiß (CDU), said on Friday: “The parliamentary group is committed to the basic pension. However, their financing must also be clarified before the cabinet has passed a resolution. The previous plans for a financial transaction tax are not fully developed and their introduction in the European context is not yet in sight. ”It must be guaranteed that retirement assets and small investors would be spared. The CDU member of the Bundestag Christoph Ploß said: “The basic pension is not linked to solid counter-financing – but that is exactly what was agreed in the coalition at the end of last year.” The draft law urgently needs to be revised. “Otherwise, in my opinion, the CDU must not agree,” emphasized Ploß.

Income test for basic pensioners living abroad not secured

Weiss also sees a need for discussion regarding the payment of a reduced surcharge above the intended income limit of 1250 euros (couples: 1950 euros). In addition, there is a complaint in the Union that an examination of the income situation is not guaranteed for basic pensioners living abroad. The law requires that they provide proof of income; however, they cannot participate in the automated process between tax offices and pension insurance. A constitutional problem could also arise because the partner income is not determined for unmarried couples who run the same household. This gives them an advantage over married couples. This could violate the protection of marriage enshrined in the Basic Law.

It is currently still unclear how investment income will be taken into account in the planned income test. These are not available to the tax authorities because the final withholding tax was introduced in 2009. Since then, the banks have been transferring the special tax due on interest and dividends to the tax office in anonymised form for their customers. The Union fears that these capital gains will be left out of the income test.

That would put foreign investment income at a disadvantage, as it would always have to be stated in the tax return, said the CSU finance politician Hans Michelbach of the FAZ. “Someone with high foreign investment income would not receive a basic pension, someone with the same high domestic investment income would receive a basic pension. That would be unconstitutional, “said the deputy head of the CSU regional group.

The amount of the basic pension lies within a wide range because it is determined on the basis of the individual pension entitlements of the low-wage earners, which are upgraded with a calculation factor. The Federal Ministry of Labor is currently struggling to quantify this range. A rough average can be calculated from the fact that the costs for around 1.4 million basic pensioners according to the draft law should be around 1.4 billion euros in the first year.

This results in an average amount of around 1000 euros per year, i.e. a good 83 euros surcharge per month. The Ministry of Labor has published sample calculations that come with significantly higher surcharges, in some cases several hundred euros. However, these examples could raise false expectations. Many basic pensioners will receive significantly less than the average EUR 83 per month.