(de-news.net) – Economist Martin Werding is pressing Germany’s government to implement its pension reform as an integrated package, while advocating changes to civil-service pensions and survivor benefits. Political divisions over early retirement remain unresolved, as consumer advocates separately call for changes to the proposed children’s pension scheme.
The German government should implement its pension reform as a cohesive package, Werding argued, warning that removing individual components could weaken the broader initiative and cause other elements to unravel. Werding, a member of both the pension reform commission and the German Council of Economic Experts, said Chancellor Friedrich Merz should ensure that the proposals do not lose momentum or coherence during the parliamentary summer recess.
The call reflects a broader concern that the reform’s individual measures are closely connected and that political disputes over particular provisions could ultimately compromise the package as a whole. Werding also called for fewer public employees to be granted civil-service status and for corresponding changes to the civil-service pension system. Teachers and potentially university professors, he argued, would not necessarily need to hold civil-service positions in the future. At the same time, adjustments made to statutory pensions should be transferred to civil-service pensions in a way that produces comparable effects.
A central element of Werding’s proposal concerns the maximum pension available to civil servants. He advocated reducing the existing ceiling, which was lowered in 2002 from 75 percent to 71.75 percent of final salary and has remained unchanged since. To bring civil-service pensions more closely into line with the effects of adjustments to statutory pensions, he argued that the maximum level would need to fall to about 68 percent. Werding also rejected earlier proposals by Social Affairs Minister Bärbel Bas to incorporate civil servants into the statutory pension system. In his view, expanding the number of participants would not resolve the system’s underlying pressures because additional contributors would ultimately also acquire future pension entitlements.
Werding has separately advocated a fundamental overhaul of survivor benefits that would ultimately phase out the widow’s pension. He argued that the existing arrangement no longer fully corresponds to contemporary social and family structures, as women increasingly make their own provisions for retirement. The widow’s pension is classified by the pension insurance system as a non-contributory benefit and costs the German pension system nearly 50 billion euros annually, equivalent to roughly one-eighth of total expenditure. Sweden offers a potential precedent: the country abolished the widow’s pension for marriages entered into after 1990 while retaining grandfathering provisions and transitional arrangements.
As an alternative, Werding proposed comprehensive pension splitting between spouses. Under such a system, pension points accumulated during the period of a shared marriage would be divided between the partners. While both were alive, their individual pensions would be somewhat lower than under the current system. After one partner died, however, the surviving spouse would receive more than half of the jointly accumulated entitlement. Werding considers such a restructuring of survivor benefits urgent, although the pension commission on which he served addressed the issue only briefly, recommending that reform options be examined against changing social norms and broader conditions.
Early retirement debate meets growing concerns
Political controversy has intensified over the planned elimination of pensioning without deductions after 45 years of contributions. Three CDU state premiers have called for a special arrangement for eastern Germany, but FDP Chairman Wolfgang Kubicki rejected the proposal, arguing that region-specific rules would add complexity to an already complicated pension system. He also contended that the so-called pension at 64.5 had disproportionately benefited people in office-based occupations rather than the workers for whom the early-retirement provision had originally been intended. The FDP therefore supports eliminating the provision.
SPD politician Steffen Krach has taken a different position, questioning the planned abolition. He has said that, if he joins the Berlin state government, he would oppose the federal pension package in the Bundesrat unless it retained the possibility of retirement without deductions after 45 years of contributions. Several state premiers have already expressed reservations about the Federal Government’s pension plans, adding another layer of political uncertainty to the reform process. Although Bundesrat approval is not legally indispensable for the legislation, failure to secure sufficient support would nevertheless represent a significant political setback for Merz and Vice Chancellor Lars Klingbeil.
The Federal Government’s proposed early-start pension program for children has meanwhile come under scrutiny from consumer advocates, who argue that changes are needed to ensure that the scheme benefits children on equal terms. Dorothea Mohn, a financial expert at the Federation of German Consumer Organizations, said the basic concept of providing state-funded retirement savings to children born from 2020 onward was sound but argued that each child should have an individual pension account from the outset. In her assessment, such an arrangement would be important to the program’s intended educational purpose by allowing children to develop a direct understanding of financial markets and their fluctuations.
Under the proposed system, the state would contribute 10 euros a month toward capital-market investments for every child between the ages of 6 and 18. Where parents do not select one of the certified private retirement investment accounts, the funds are currently intended to be invested collectively through the Bundesbank. Consumer advocates regard this structure as a potential weakness because children would not necessarily know that investments were being made on their behalf and would not be able to observe the development of an account associated directly with them.
Mohn warned that the arrangement could ultimately produce a two-tier pension system for children, in which families with greater financial resources and investment knowledge were better positioned to realize the program’s full potential. The concern centers not only on the amount invested but also on whether children can participate directly in the financial education that the scheme is intended to provide. The Federal Government plans to present the draft legislation to the Cabinet on Aug. 12.
