Who really benefits from the basic pension

The black-red coalition sees the introduction of a basic pension for low-wage earners as a socio-political milestone. For months, the governing parties struggled to find a solution. Now they have announced an agreement in Berlin.

Not everyone will benefit from the introduction of the basic pension.

Dhe federal government has paved the way for the basic pension. From January 2021 onwards, those low-wage earners who have worked for at least 33 years, raised children or cared for relatives will receive a pension bonus. The cabinet approved the draft law by Labor Minister Hubertus Heil (SPD) on Wednesday, who then presented his plans together with Health Minister Jens Spahn (CDU) and Interior Minister Horst Seehofer (CSU).

Heil called the decision on the basic pension, which had been fought for under various names for many years, a “socio-political milestone” and a necessary contribution to the fight against poverty in old age. “The basic pension makes the country a little fairer,” said Heil. It should now be implemented in a “citizen-friendly and unbureaucratic way”.

Spahn and Seehofer praised the “successful compromise” and assessed it as proof of the ability of the black-red coalition to work. Seehofer used the phrases “finally” and “beautiful day”. A previously missing component is now being added to the old-age insurance system.

1.3 million people should benefit

The basic pension honors the performance of those who have worked long and still barely make ends meet, said Spahn. They had long been promised a pension premium, and the coalition wanted to regain trust with the basic pension. The basic pension will “make a difference” for 1.3 million people, 70 percent of whom are women.

They will receive the benefit without a separate application and regardless of whether they earned their low income full-time or part-time. The pension entitlements acquired by the beneficiaries themselves after 35 years are doubled, but to a maximum of 80 percent of average earnings.

Those who can show that they are 33 years old should also receive a reduced allowance. In this way, “hard edges” should be avoided. In addition, allowances for housing benefit, basic security for job seekers and social assistance are introduced for all people who have had a basic pension of at least 33 years. In this way, those who continue to receive social benefits despite a basic pension should also be better off.

The costs are likely to be 1.3 billion euros initially

According to the draft law, the number of beneficiaries will increase to around 1.5 million by 2030. Taxable income up to 1250 euros for single persons and 1950 euros for couples are not taken into account. Anything above this will initially be credited to 60 percent of the basic pension.

Anything over 1,600 euros (pairs: 2,300 euros) will be credited 100 percent. According to the draft law, the costs including the health insurance contributions to be paid will amount to around 1.3 billion euros in the first year of 2021. Taking future pension adjustments into account, they will rise to around 1.6 billion euros by 2025.

Despite the improvement of the original draft law with regard to the inclusion of investment income and foreign income in the income test, there are still reservations in the Union parliamentary group about the basic pension – also because of the vague financing “from tax revenues”. Seehofer said that there would still be “optimizations” in the upcoming parliamentary procedure, but that this was “not a sign of conflict, but a matter of course”.

The pension insurance reacts distantly

Spahn pointed out that the basic pension will be borne by the entire CDU top: “Angela Merkel, Armin Laschet, AKK, Jens Spahn, Ralph Brinkhaus and Friedrich Merz – and maybe Norbert Röttgen.” Financing referred Spahn to the “convincing confidence of Finance Minister Olaf Scholz” for a financial transaction tax on share transactions. According to the will of Scholz and Heil, this should contribute around one billion euros, the remaining funds should be reallocated to Heil’s budget.