A Standardised Federal Pension

Pension provision in Germany faces three key challenges: 

• Poverty in old age: Due to varying and unstable employment histories, people pay less into the pension insurance system, which reduces their monthly payments in old age. 
• Differences in life expectancy: Since income correlates with life expectancy, the current pension system leads to subsidies for high earners and deductions for low earners. 
• Expansion of the concept of benefits: Beyond gainful employment, many people make valuable contributions to society (e.g. in the form of care or voluntary work) that are not sufficiently recognised in the current pension system. 

The prospects for old age are particularly sobering for people with low to medium incomes. They can neither expect a secure and adequate state pension nor do they have the resources to provide sufficient private provision. At the same time, they are too wealthy to receive comprehensive social security benefits. 

Efficient adjustment is made difficult by the requirement that the pension insurance system simultaneously prevent poverty and reward performance: these are contradictory goals that can only be achieved simultaneously for very high incomes. They should therefore be divided between two pillars: 

• First pillar: To combat poverty, the state pays a uniform federal pension linked to the minimum wage and thus preventing poverty to everyone who reaches retirement age. Those who have lived in the country for 50 years and have been employed for 20 years are entitled to the full pension amount. 
• Second pillar: To ensure that performance continues to be rewarded, state-supported private or occupational pension schemes are available. This maintains the possibility of status differentiation. 

Such a fundamental paradigm shift ensures reliable prospects of an adequate pension that prevents poverty for all. Lifetime achievements are recognised in a general and benevolent manner – regardless of whether they were made in the family, at work or in overcoming hardship.