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[Dossier] Deutschland - Rentensystem
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Pension
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.
- Revenues & Expenditures
- Poverty in Old Age
- What a Stock Pension could bring and what not
- Comparison with Austria
1. Revenues & Expenditures
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 |
1.3. 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]
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]
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
2. Poverty in Old Age
2.1. Pension Level
If one compares pension adjustments with the inflation rate two things become clear. In the old federal states pension adjustments correspond to the inflation rate and the new federal states have been able to somewhat catch up in comparison. But that also means that the real purchasing power of statutory pensions has not increased. The increase in productivity of the economy cannot therefore be consumed by the statutory pension. Incomes must increase by the inflation rate plus the increase in productivity of the economy (golden wage rule) otherwise more value will be produced but cannot be consumed.
[3a] [3b] [4, ZCPIN]This becomes particularly clear when one normalizes the inflation rate/consumer price index, pension adjustments and GDP per capita. Pension adjustments for western Germany roughly follows the inflation rate while those for eastern Germany are slightly above it. However both pension adjustments are below GDP growth per capita.
[3a] [3b] [4, HVGDP] [4, ZCPIN]
| Year | Inflation Rate / % [4, ZCPIN] | Pension Adjustments / % [3a] | |
|---|---|---|---|
| West | East | ||
| 1995 | 1,45 | 0,5 | 2,48 |
| 1996 | 1,94 | 0,95 | 1,21 |
| 1997 | 0,91 | 1,65 | 5,55 |
| 1998 | 0,59 | 0,44 | 0,89 |
| 1999 | 1,44 | 1,34 | 2,79 |
| 2000 | 1,98 | 0,6 | 0,6 |
| 2001 | 1,42 | 1,91 | 2,11 |
| 2002 | 1,03 | 2,16 | 2,89 |
| 2003 | 1,67 | 1,04 | 1,19 |
| 2004 | 1,55 | 1 | 1 |
| 2005 | 1,58 | 1 | 1 |
| 2006 | 2,30 | 1 | 1 |
| 2007 | 2,63 | 0,54 | 0,54 |
| 2008 | 0,31 | 1,1 | 1,1 |
| 2009 | 1,10 | 2,41 | 3,38 |
| 2010 | 2,08 | 1 | 1 |
| 2011 | 2,01 | 0,99 | 0,99 |
| 2012 | 1,50 | 2,18 | 2,26 |
| 2013 | 0,91 | 0,25 | 3,29 |
| 2014 | 0,51 | 1,67 | 2,53 |
| 2015 | 0,49 | 2,1 | 2,5 |
| 2016 | 1,51 | 4,25 | 5,95 |
| 2017 | 1,73 | 1,9 | 3,59 |
| 2018 | 1,45 | 3,22 | 3,37 |
| 2019 | 0,14 | 3,18 | 3,91 |
| 2020 | 3,07 | 3,45 | 4,2 |
| 2021 | 6,87 | 1 | 0,72 |
| 2022 | 5,95 | 5,35 | 6,12 |
| 2023 | 2,26 | 4,39 | 5,86 |
| 2024 | 2,30 | 4,57 | 4,57 |
| 2025 | 2,21 | 3,74 | 3,74 |
2.2. Risk of Poverty
As already derived the main revenue of the pension insurance are the contributions and were shortened. In addition to regular pensions the pension insurance as the main expenditure also pays for additional non-insurance benefits.
And the Sbotage of the pension insurance can be seen at the poverty rate for seniors. In 2014 the poverty rate for pensioners even exceeded the poverty rate of the entire population. Und in 2020 the poverty rate for seniors exceeded the poverty rate of the entire population.
[1] [2] Src:[1] Armut in Deutschland
https://de.statista.com/themen/120/armut-in-deutschland/#topicOverview
[2] Altersarmut - Alterseinkommen und Altersarmut 2024-04-30
https://www.bpb.de/themen/soziale-lage/rentenpolitik/288842/altersarmut/
[3a] Rentenanpassung 2025: Wieder deutliche Rentensteigerung 2025-03-06
https://www.deutsche-rentenversicherung.de/DRV/DE/Ueber-uns-und-Presse/Presse/Meldungen/2025/250306-rentenanpassung-2025.html
[3b] Rentenanpassungen der Bundesregierung für West- und Ostdeutschland in den Jahren von 1995 bis 2024
https://de.statista.com/statistik/daten/studie/4806/umfrage/rentenanpassungen-der-bundesregierung-seit-1999/
[4] AMECO database
https://economy-finance.ec.europa.eu/economic-research-and-databases/economic-databases/ameco-database_en
3. What a Stock Pension could bring and what not
In Germany there is a constant agitation against the pay-as-you-go pension system. And time and again the idea of a stock-based pension has been and continues to be floated around. This is done because the pay-as-you-go pension system is supposedly no longer working.
In the past voluntary pension schemes such as Riester and Rürup pensions were introduced. Furthermore a mandatory scheme was agreed upon with the Pension Package (Rentenpaket) II but was never implemented. But on closer inspection one can see that the pay-as-you-go pension system continues to work perfectly.
3.1. Pension Package (Rentenpaket) II
As a supposed measure against the demographic change the federal government has passed the so-called Pension Package (Rentenpaket) II. This was intended to ensure that the pension level does not fall below 48 % of the average wage by 2039. An increase in the pension level though is not planned. A stock pension would be agreed for this purpose. [1] [2]
From the mid-2030s onward the returns from a 200 billion Euro fund were intended to relieve the burden on the pension system. This fund or equity-based pension was intended to serve as generational capital (Generationenkapital). The money for this fund was initially to be financed through debt. Later direct federal investments were to be added. [1] [2] [3]
However this means that the interest reduces the revenue and thus the relieve. Due to interest, administrative costs and inflation the fund must achieve a return of 7.5% per year. For comparison the German fund for financing nuclear waste disposal (Fonds zur Finanzierung der kerntechnischen Entsorgung/KENFO) only achieved just under 5% per year in the years 2020 to 2022 inclusive. As a result money is being put into the stock market without any relief for the pension insurance system being expected. In addition once the fund reaches a certain total size the federal government can also withdraw money again for example to plug budget holes. [1] [2] [3] [4] [5] [6] [7]
3.2. Mackenroth Theorem
Generally it can be asserted that a pension can only be generated by the working population. Whether this is collected through taxes or returns on shares is secondary. In economics this is also referred to as the Mackenroth theorem.
Furthermore capital based systems are much more vulnerable to crises. As long as someone works income can be paid out as pensions through contributions. A capital based system on the other hand is based on the fact that profits can be distributed in the form of equity stakes. As long as someone works income can be redistributed, but returns can only be paid out if profits are generated.
3.3. Consequences
All capital based systems lead to a systematic shortfall in demand. Capital based pension systems mean that existing income is not spent but saved leading to a shortfall in demand in the following period. In a system where nothing else changes any savings result in a decrease.
In fact the government is offering additional capital to the stock market. The stock market therefore has a victim that is willing and has purchasing power to whom bad stocks can be sold. And in order to achieve the return the government has created an incentive to tax capital gains ever lower.
Outsourcing the burden of pensions to foreign countries seems like an obvious solution but is not an expedient one.
While capital could be transferred this would force and necessitate unbalanced foreign trade balances.
And it would involve additional trade in mobile goods specifically commodities and more generally industrially produced goods.
The country that initially generates claims through capital backing would exacerbate import surpluses/export deficits.
However there must be countries with export surpluses/import deficits.
Ultimately the foreign trade balance of the entire world or of all countries is always zero.
Unbalanced foreign trade balances would force an appreciation or depreciation of the respective currency.
Then claims generated through capital backing would disappear.
However unbalanced foreign trade balances would lead to countries with export surpluses/import deficits continuously producing more than they consume or foregoing a portion of their own production.
[1] Rentenpaket II 2024-09-27
https://www.deutsche-rentenversicherung.de/DRV/DE/Ueber-uns-und-Presse/Presse/Meldungen/2024/240927-rentenpaket-2-erste-beratung-bundestag.html
[2] Nach monatelanger Debatte - Kabinett beschließt Rentenpaket 2024-05-29
https://www.tagesschau.de/inland/innenpolitik/rentenpaket-114.html
[3] Generationenkapital - So funktioniert die kapital-gedeckte Säule der Rente 2024-03-06
https://www.finanztip.de/aktienrente/#c104673
[4] KENFO fährt im Jahr 2020 Rendite von 8,3 Prozent ein 2021-07-01
https://www.dpn-online.com/news/institutionelle-investoren/kenfo-faehrt-im-jahr-2020-rendite-von-83-prozent-ein-125925/
[5] JAHRESBILANZ 2022 - Kenfo verliert mehr als 3 Milliarden Euro 2023-06-30
https://www.private-banking-magazin.de/portfolio-aktien-kenfo-verliert-mehr-als-3-milliarden-euro/
[6] Benchmark geschlagen - Manager des Kenfo erwirtschaften Rekordrendite 2024-07-03
https://www.private-banking-magazin.de/benchmark-geschlagen-kenfo-erwirtschaftet-rekordrendite/
[7] Zielrendite übertroffen - Manager des Kenfo erzielen mehr als 9 Prozent Rendite 2025-07-11
https://www.private-banking-magazin.de/kenfo-rendite-94-prozent-aktien-portfolio-jahresbericht/
4. Comparison with Austria
Austria and Germany both have pay-as-you-go pension systems. As far as demographic change is concerned the population pyramids of both countries are almost identical. This is no coincidence as both countries have a similar story. In addition the per capita GDP of both countries (2025) with 53,431.62 Euro (Germany) and 55,771.32 Euro (Austria) could hardly be closer. The pension levels of both countries on the other hand could hardly be any different.
[1] [2] [1] [2] [3, HVGDP]4.1. Germany
In Germany the contribution rate to the statutory pension insurance is 18.6% and the employee and employer each take on 9.3%. The standard retirement age due to old-age is at an average of 64.3 years and for receiver of additional provisions at an average of 62.3 years. And there are 35 pensioners for 100 depositors. In Germany the standard level for pensions is at an average of 1,054.- Euros and at 898.- Euros for reduced earning pensions. [4,S.15] [4,S.16] [5,S.217] [5,S.266] [6,S.5] [6,S.10]
In Germany there is still the private pension system of the Riester pension. However if the pension is below the basic security then the Riester pension is counted. But these pensions in Germany turned out to be unprofitable because its return is hardly above inflation. The reason for this is that the calculated life expectancy is significantly higher than the actual one. In the linked investigation the pension period after the pension was 67 was 50 years. So a person has to become 117 years old just to break even. [7] [8]
4.2. Austria
In Austria the contribution rate to the statutory pension insurance is 22.8% employees take over 10.25% and employers take over 12.55%. The standard retirement age due to old-age is at an average of 61.7 years and for receiver of additional provisions at an average of 60.3 years. And there are 30 pensioners for 100 depositors. In Austria the standard level for pensions is at an average of 1,794.- Euros and at 1,321.- Euros for reduced earning pensions. [4,S.15] [4,S.16] [5,S.217] [5,S.266] [6,S.5] [6,S.10]
4.3. Conclusion
In 2024 the German pension insurance system (Deutsche Rentenversicherung/DRV) also conducted an analysis to determine why the pension level in Austria is higher than in Germany. Austria's demographics are considered more favorable but this cannot be easily changed. However it was also determined that the higher contribution rate, the higher federal subsidy and the larger number of people with mandatory insurance are helpful. And it is precisely these three factors that Germany could change. [9]
[9]
- higher contribution rate
- more federal subsidies
- more people with compulsory insurance
- younger population
- other factors
The German pension level in the listing of the OECD is already far back while Austria takes one of the front places. In direct comparison with Austrians they retire earlier and get paid higher pensions than Germans. So the question arises why Germany as the supposedly richest economy in Europe have a significantly lower pension level than small Austria. An essential part of the answer is the reduction of the contribution rate for the statutory pension insurance within the framework of the Agenda 2010 for wage retention.
The demographic change as an explanation for the low level of pensions in Germany falls flat. This can also be explained by simple comparisons. 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.
Src:[1] Population Pyramid - Germany
https://www.populationpyramid.net/germany/2024/
[2] Population Pyramid - Austria
https://www.populationpyramid.net/austria/2024/
[3] AMECO database
https://economy-finance.ec.europa.eu/economic-research-and-databases/economic-databases/ameco-database_en
[4] ALTERSSICHERUNG IN DEUTSCHLAND UND ÖSTERREICH: VOM NACHBARN LERNEN?
http://www.boeckler.de/pdf/p_wsi_report_27_2016.pdf
[5] Pensions at a Glance 2015 OECD anD G20 indicators
http://www.oecd.org/berlin/publikationen/pensions-at-a-glance-2015.htm
[6] RENTEN IN DEUTSCHLAND UND ÖSTERREICH - Fragen und Antworte - 2021-12
https://www.wsi.de/fpdf/HBS-008211/p_wsi_pb_64_2021.pdf
[7] Riester- und Rürup-Renten werfen nur mickrige Renditen ab - 2024-01-24
https://www.sueddeutsche.de/wirtschaft/riester-ruerup-altersvorsorge-1.6338057
[8] Riester- und Rürup-Renten: Zwei Prozent sollten es schon sein - 2024-01-24
https://www.finanzwende-recherche.de/unsere-themen/riester/kundennutzen-bei-riester-und-ruerup-renten/
[9] „Vorbild“ Österreich? Was macht unser Nachbarland anders bei der Rente? 02/2024
https://rentenupdate.drv-bund.de/DE/1_Archiv/Archiv/2024/03_Oesterreich.html