[Economics] Germany's Pension-System - Revenues & Expenditures

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[Economics] Germany's Pension-System - Revenues & Expenditures

Germany has a pay-as-you-go pension systems. So the part of the population of working age pays for people of retirement age. And after joining the pension the former working people are provided by the next generation.

By paying into the statutory pension one acquires the right to receive a pension. This pension is compulsory for employees. Self-employed people, freelancers and those not in employment can make voluntary contributions.

In Germany there is a constant agitation against the pay-as-you-go pension system. Now a stock pension as a funded pension has been introduced. This was decided because the pay-as-you-go pension system supposedly no longer works. But on closer inspection one can see that the pay-as-you-go pension system continues to work.

1.1. Annual Balance

Overall the annual balance of the pension insurance is well balanced. This also makes sense despite an ageing society. The explanation for this is that labor productivity exceeds the ageing of society. The working part of society therefore generates greater economic value even if its population share decreases. [7]

Year	Revenue / Billion Euro		Expenditure / Billion Euro
	Total / Billion Euro [7]	Federal Subsidy / Mrd. Euro [2] [2b]	Total / Billion Euro [7]	Tot. Non-Insurance Benefits / Mrd. Euro [8] [8b]
1960	10,734		10,024	2,579
1965	17,105		16,139	4,08
1970	28,56		26,71	5,717
1975	51,417		51,67	10
1980	74,321		72,839	19,796
1985	90,169		89,449	25,522
1990	114,998		110,093	31,833
1991	139,452		133,735	38,565
1995	179,303	37,399	184,38	59,924
1996	188,014	39,425	191,629	63,516
1997	197,24	42,246	196,269	64,803
1998	204,286	49,231	202,55	67,39
1999	211,848	49,833	206,969	67,509
2000	214,566	49,771	213,986	72,217
2001	220,317	53,418	220,282	73,742
2002	223,593	56,715	227,719	74,888
2003	231,882	61,084	233,871	76,305
2004	232,468	61,416	235,433	77,058
2005	231,687	61,638	235,616	77,454
2006	243,099	61,399	235,537	77,632
2007	238,289	62,191	237,106	68,955
2008	244,205	62,521	240,43	69,946
2009	246,044	63,307	245,833	69,942
2010	251,254	64,88	249,197	70,854
2011	255,771	64,575	251,045	71,164
2012	260,467	65,564	255,37	72,882
2013	260,669	65,284	258,77	73,708
2014	269,359	66,614	266,193	77,495
2015	276,161	67,698	277,749	81,292
2016	286,188	69,734	288,43	84,833
2017	299,461	73,019	298,932	98,946
2018	312,282	74,764	307,851	102,058
2019	326,677	77,561	324,816	109,924
2020	334,413	80,544	338,3	112,347
2021		83,926		115,063
2022		86,215		119,618
2023				126,261
2024				133,82

In the first approximation the balanced balance sheet is all the more impressive because the contributions and thus the income of pension insurance were reduced. In addition the pension insurance also takes on non-insurance benefits. However with the federal subsidy the federal government supports the share of the non-insurance benefits that are not covered by the pension insurance. Thus the pension insurance is inevitably balanced. [1] [5] [6]

[7]

[2] [2b] [3, UVGD] [7] [8] [8b]

1.2. Contribution Rate

The income from contributions is the main income of the pension insurance. And as long as labor productivity (technical progress in the production of goods and services) predominates the aging of society a pay-as-you-go pension systems continues to work.

With exceptions the contribution rate has been falling since 1999. And since 2011 the contribution rate has only been falling. This deliberately slew down the income of the pension insurance. This amounts to sabotage of the pension insurance. [1]

Year	Contribution Rate / % [1]
2000:	19,3
2001 - 2002:	19,1
2003 - 2006:	19,5
2007 - 2011:	19,9
2012:	19,6
2013 - 2014:	18,9
2015 - 2017:	18,7
2018 - 2026:	18,6

[1]

1.3. Federal Subsidy

The expenditure for regular pensions are the main expenditures of the pension insurance. In fact the pension insurance takes more from the contributions (main income) than it pays for regular pensions (main expenditures). If the federal government fully took over the non-insurance benefits, the income would be 12 to 16% (2017-20) greater than the expenses and higher pensions immediately possible.

In addition to contribution income the pension insurance receives a subsidy from the federal budget. And in addition to pensions for pension insurance contributions the pension insurance also pays so-called non-insurance benefits. This includes for example orphans' pensions, widows' pensions, disability pensions and credit for child-rearing periods. These are claims that are based on no or only partial payments into the pension insurance. But since these are tasks for society as a whole these benefits are legitimate.
However pension insurance pays more for non-insurance benefits than it receives in the form of the federal subsidy. This amounts to sabotage of the pension insurance. [2] [2b] [7] [8] [8b]

[2] [2b] [8] [8b]

[2] [2b] [7] [8] [8b]

The amount of federal subsidies is stable. The federal subsidy does increase in the long term but this is to be expected as overall economic output also increases in the long term. As a share of GDP the federal subsidy is constant. And as a share of the federal budget the federal subsidy is even decreasing. [2] [2b] [3, UVGD] [7] [8] [8b]

Pensions are subject to income tax. This means that the state (federal, state and local governments) receives tax revenues when the German pension insurance system (Deutsche Rentenversicherung/DRV) pays out pensions. The tax revenue from pensions is even comparable to the federal government's subsidy to the pension insurance system. In 2021 51.4 billion Euros in tax revenue was generated from pensions, representing 61.24% of the federal government's subsidy to the pension insurance system. And in 2022 54.8 billion Euros in tax revenue was generated from pensions, representing 63.56% of the federal government's subsidy to the pension insurance system. [9]

1.4. Conclusion

It is as the pension insurance president Gundula Rossbach sayd. The pay-as-you-go pension system also works inspite of an ageing society and when non-insurance benefits are paid from it as well. [10]

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Src:
[1] Beitragssätze zur Rentenversicherung 1955 - 2023 und bis 2030
https://www.sozialpolitik-aktuell.de/files/sozialpolitik-aktuell/_Politikfelder/Alter-Rente/Datensammlung/PDF-Dateien/abbVIII43a.pdf
[2] Bundeszuschüsse an die Rentenversicherung 2023-07-28
https://www.bundesamtsozialesicherung.de/de/themen/rentenversicherung/finanzierung/
https://www.bundesamtsozialesicherung.de/fileadmin/redaktion/Rentenversicherung/Finanzierung/Bundeszuschuesse2022.pdf
[3] AMECO database
https://economy-finance.ec.europa.eu/economic-research-and-databases/economic-databases/ameco-database_en
[5] Experten üben Kritik - Bericht: Bund plündert die Rentenversicherung 2024-05-26
https://www.t-online.de/nachrichten/deutschland/innenpolitik/id_100413844/rente-bund-soll-laut-einem-bericht-die-rentenversicherung-pluendern.html
[6] Rente: Bundesrechnungshof kritisiert Intransparenz bei versicherungsfremden Leistungen 2023-12-14
https://www.versicherungsbote.de/id/4913047/Rente-Bundesrechnungshof-kritisiert-massive-Intransparenz-bei-versicherungsfremden-Leistungen/#post_chapter_all
[7] Einnahmen und Ausgaben der gesetzlichen Rentenversicherung (GRV) 2022-12-20
https://www.bpb.de/kurz-knapp/zahlen-und-fakten/soziale-situation-in-deutschland/61857/einnahmen-und-ausgaben-der-gesetzlichen-rentenversicherung-grv/
[8] Jährliche versicherungsfremde Leistungen seit 1957 – Teufel-Tabelle
https://www.adg-ev.de/.../1387-versicherungsfremde
https://www.adg-ev.de/publikationen/publikationen-altersvorsorge/1387-versicherungsfremde-leistungen-2015?start=2
[9] Geplante Rentenerhöhung - Steuerlast für Rentner steigt um vier Milliarden Euro 2025-01-04
https://www.tagesschau.de/inland/innenpolitik/renten-besteuerung-100.html
[10] Rentenversicherungspräsidentin Roßbach: „Die Rente ist verlässlich“ 2023-03-07
https://www.merkur.de/wirtschaft/rente-versicherung-deutschland-rossbach-interview-sicherheit-ausblick-92126352.html