Martin Gasche

Auf der Suche nach der besten Rentenanpassungsformel (On the Hunt for the Best Pension Adjustment Formula in Germany)

Due to its complexity and incomprehensibility the mechanism for the annual pension adjustment in Germany has experienced rising criticism. We compare the actual formula and alternative adjustment proposals on the basis of different criteria. It will become evident that the current formula is better than its reputation suggests. However, a salary indexed adjustment formula extended to include a sustainability factor presents a valid alternative. Such a formula is coherent and predictable, it guarantees pensioners’ participation in the technological progress, it balances the opposing goals of stable contribution rates and stable replacement rates, it limits intergenerational inequality and leads to a self stabilizing pension system. Adjustment formulas that are indexed to the wage bill or the inflation rate turn out to be less appropriate because they don’t adequately account for future demographic changes.

Additional Lump-Sum Contributions and Social Compensation in the Statutory Health Insurance: Incentives and Predictions Until 2030

The announced reform of the funding of statutory health insurance providers lets health insurance funds levy unlimited additional lump-sum contributions. The associated reform of social compensation fixes two faulty designs of the current system. On the one hand, the determination of the amount of social compensation based on the average amount of additional contributions provides further incentives for low-income earners to change to a cheaper health insurance fund. On the other hand, the distortion of competition, which might arise in the current system due to social compensation within one health insurance fund, is remediated by the announced implementation of social compensation not within but among all health insurance funds. If the general rate of contribution is fixed at a level of 15.5% and further increases of expenditures in the future are covered by additional contributions, the share of additional contributions in funding will rise to 14% of total expenses in the baseline scenario and to 25% in the realistic scenario. The volume of social compensation for retirees and employees subject to social insurance contributions will be relatively low until 2015, but will rise until 2030 to 15 Billion Euros in the baseline scenario and to 41 Billion Euros in the realistic scenario. Adding the general federal grant, the federal government’s share in funding will rise from 8% nowadays to 9% in 2030 (baseline scenario) or up to 18% (realistic scenario). In comparison to an income-based system without additional contributions, low-income earners will have to carry an additional burden while high-income earners will be unburdened. However, this will only happen if the additional contribution equals the average additional contribution. If a health insurance fund charging lower additional contributions is chosen, the rates partly reverse and low-income earners may experience financial relief, which will be greater the lower the income.

Pensioners in the German Social Security System: Payments of Contribution and Benefits

Pensioners receive pension payments as well as health insurance and nursing insurance benefits. But pensioners are also contributors to the health and nursing insurance. So the pensioners fund part of the expenditures they cause by themselves. This study takes a closer look at the different pensions (old-age pension, disability pension and widow and widower pension) and their characteristics such as the age distribution of pension recipients, the income structure or the income distribution. The social security contributions and the expenditures of the social insurance for pensioners will be determined age-specific and sex-specific. It can be stated that the contributions of the pensioners to the statutory health insurance are not sufficient to cover the caused expenditures starting at the age of 45 on average. Comparing the sum of contributions with the sum of expenditures leads to the conclusion that pensioners’ contributions cover 44% of the expenditures of the statutory health insurance and 27% of the expenditures of the long term care insurance.