Germany's proposed pension reform initiated by Merz sparks demands for scrutiny of neighboring countries' pension systems among leftist groups.
In the realm of pension reform, two European countries stand out for their unique approaches - Germany and Austria. Let's delve into the key differences between these two systems.
Experts have long advocated for a fundamental overhaul of the German pension system, while Austria's system, with its higher contribution rates and stronger tax subsidies, has been praised for its generosity.
Contribution Rates
Austria's pension expenditure amounts to around 11.1% of its GDP, significantly higher than Germany's 8.9%. The funding of Austria's pension system is mostly pay-as-you-go (83%), with 15% funded and only 3% private, compared to Germany's 79% pay-as-you-go, 14% funded, and 7% private pension components.
Retirement Age
Germany has gradually increased its statutory retirement age to 67 since 2012, aiming to extend working lives. In contrast, Austria generally has a retirement age around 65 for men and women, though some reforms have been underway to increase this gradually.
Pension Entitlement and Payout
Austria offers a higher average pension payout per retiree (€24.3K) compared to Germany (€17.9K), indicating more generous pension benefits per capita in Austria. However, Germany's pension system is under pressure due to demographic challenges and low birth rates, leading the government to consider hybrid models involving private pensions to sustain benefits.
System Coverage
Both countries have predominantly public (pay-as-you-go) pension systems, but Austria relies slightly more on funded elements (15%) than Germany (14%). Both have small private pension shares (3% Austria, 7% Germany).
Notable Figures and Recommendations
Sören Pellmann, leader of the Left Party's parliamentary group, has accused the Union and employers of waging a "campaign against the welfare state" regarding pension reform. Pellmann recommends raising contribution assessment limits and moderately increasing contribution rates for the German pension system to finance an increase in the pension level to 53%.
Marcel Fratzscher, President of the German Institute for Economic Research (DIW Berlin), has stated that Austria can serve as a model for Germany in pension reform, particularly in terms of integrating civil servants and the self-employed to strengthen the statutory pension and significantly increase the pension level.
Chancellor Friedrich Merz has promised a "fall of social reforms" and plans to tackle the German pension system. Economics Minister Katherina Reiche of the CDU has called for an increase in the retirement age, which has been met with resistance from parts of the CDU, SPD, and opposition.
Pellmann also suggests introducing a solidarity insurance for health and long-term care insurance to decrease contributions there without cuts in benefits.
In conclusion, Austria's pension system is characterised by higher relative spending and larger per-capita payouts, with a strong pay-as-you-go base and some funded elements. Germany balances a lower relative pension spending with an increased retirement age of 67 and policies to extend working lives, while facing demographic pressures that drive interest in hybrid pension models combining public and private elements. Both systems have predominantly public pension coverage but differ in generosity and retirement age policies.
- In the context of policy-and-legislation and general-news, experts have discussed the need for reform in Germany's pension system, with Austria's system often cited as a potential model, especially due to its higher contribution rates and stronger tax subsidies.
- This discussion around pensions in Europe has involved renowned figures like Sören Pellmann and Marcel Fratzscher, who have advocated for different approaches to reform, with Pellmann suggesting higher contribution rates, moderately increasing contribution limits, and implementing a solidarity insurance, while Fratzscher has suggested integrating civil servants and the self-employed to strengthen the statutory pension and increase the pension level.
