Rising reliance on social welfare among retired Germans
In Germany, a rising number of retirees are relying on social assistance, a trend that has become a significant concern. Decades of hard work have not been enough for many retirees to secure a comfortable retirement, as meager pensions force them to rely on social assistance or continue working.
The solution proposed to address this issue is a comprehensive pension reform, modelled after the successful pension system in Austria. This reform aims to improve the overall pension system, potentially reducing the need for social assistance among retirees and establishing a poverty-proof minimum pension.
Austria's pension system, which also relies on a pay-as-you-go model, includes a mandatory second pillar (private occupational pensions) and a third pillar (private pensions) for additional retirement income. The combination of these comprehensive pension pillars provides a more robust retirement income structure compared to Germany's more voluntary approach.
Austria's strong economy and high tax base allow for more generous retirement benefits without placing an undue burden on the overall economy. The country ranks well among European countries in terms of retirement spending, with a retirement spend per capita of €24,300 in 2022, significantly higher than the EU average.
Germany's pension system, on the other hand, faces a significant pension gap due to a rapidly aging population and an increasing number of retirees relative to the workforce. Small and medium-sized businesses struggle with high costs and complex administration of occupational pensions.
The proposed pension reform in Germany, if implemented, could potentially lift the average pension by 800 euros. This reform could involve implementing a mandatory second pillar similar to Austria's and strengthening the third pillar by making it more attractive or mandatory, to further increase retirement income.
However, the current political climate in Germany raises concerns about the implementation of such reforms. The money that could potentially be used to lift the elderly out of poverty and ensure decent pensions is instead being used for weapons exports, as evidenced by the nine billion euros being provided by Merz and Pistorius for weapons to Ukraine this year.
As the issue of retiree poverty continues to grow, the German government must carefully consider the potential benefits of pension reforms modelled after Austria's successful system. Enhancing economic diversification and fiscal revenues could support more generous pension benefits and provide a more secure future for Germany's retirees.
The proposed pension reform in Germany, following Austria's successful model, aims to improve the business of retirement financing by introducing a mandatory second pillar and strengthening the third pillar, potentially reducing the need for politics-related social assistance among retirees and establishing a general-news-worthy minimum pension.
Austria's robust retirement system, with its comprehensive pension pillars, provides a stronger structure for finance and business compared to Germany's more voluntary approach, giving retired Austrians a higher retirement spend per capita, while Germany faces a significant pension gap due to its aging population.
