Reliability and affordability

©REUTERS/Fabrizio Bensch

No country can detach itself from globalisation and demographic trends, and Germany is no exception. On the contrary, Germany bears a special burden, owing to the impact of German reunification. With Agenda 2010, the government introduced a number of reforms to improve the economic framework and modernise our social systems. Since 2001, we have been implementing, with our pension reforms, a concept which combines reliability with affordability.
A sustainability factor was introduced to ensure that the demographic burden is borne equally by both those paying into the system and the pensioners themselves. Not only do these measures serve to protect the rights of pensioners, at the same time, the contributors–and companies–are protected from rising contribution rates. That is why the law is called the Pension Insurance Sustainability Act. This, too, is a question of social balance: if there is little left to share around, then for the gainfully employed, our children and grandchildren, pensions will not increase either, or will do so only negligibly.The statutory pension insurance remains the centre piece of providing security in old age. However, it will not be enough on its own to guarantee the same standard of living in old age. The supplementary, capital-based funded provision will become increasingly important–alongside the statutory pension insurance–and has consequently been receiving state financing since 2001. It is predominantly families and low-income earners who are receiving assistance in creating funded supplementary old-age provision. Basic protection has served to spread a net against oldage poverty, and early retirement options are being phased out. If old-age protection is to remain stable in the future, it is imperative that older citizens continue to be given a chance on the labour market.Signs of success are already evident. The contribution rates have been kept stable, despite the difficult economic situation in Germany in recent years. The average effective pension age has increased and oldage poverty has decreased. More and more of our citizens are supplementing their old-age provision. In short, old-age protection in Germany has a future.©OECD Observer No. 248, March 2005 See also replies by five other OECD ministers: Australia’s minister for family and community services, Kay Patterson, Netherlands' minister for social affairs and employment and chair of the 2005 OECD social affairs meeting, Aart Jan de Geus, Korea’s Geun Tae Kim, minister for health and welfare and co-chair of the 2005 meeting, Sweden’s minister for social affairs, Berit Andnor, who is also co-chairing, and from the US, Wade F. Horn, who is assistant secretary for children and families at the DHHS.

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