Young people have to pay more, but they do not receive more pensions. Nothing changes for the older generation. This is a brief and concise summary of the Pension Package II, which was recently introduced by the federal government. There is also talk of the “casino pension”. Since then, I have been wondering what was going on in the minds of those responsible. Because the package does not solve any of the pension problems, but rather creates many new ones. But then I read an interview by the Minister of Labor, Hubertus Heil, in the Zeit newspaper. After that, many things became clearer. Three responses in particular stuck with me. They are evidence of sugarcoating, denial of problems, and self-imposed prohibitions on thinking about politics.

1) It would have been more expensive anyway

“This (i.e. the increase in pension contributions) is mainly a consequence of demographics. Without the pension package we would also be at 21.3 percent in 2045. This means that the increase in contributions caused by our measures amounts to only one percentage point.”

The SPD politician has already correctly recognized that contributions are increasing due to demographic change (more pensioners, fewer taxpayers). That is why a pension reform is necessary so that contributions do not continue to rise with all the consequences that would be, for example:

• Higher non-wage labor costs make work more expensive and make Germany less attractive as a location for companies.
• Employees are left with less salary. This is unlikely to attract valuable skilled workers from abroad.
• The generational contract is losing support because young people have to contribute more than older people, but without receiving anything in return.

The federal government's pension package does not even ensure that contributions remain constant, but rather exacerbates the problem. One could also translate Heil's statement as follows: “We are making a problem bigger, but only a little. Alright.”

Clemens Schömann-Finck is a financial expert and is behind the YouTube channel “René wants profitability”. In his FOCUS Online column he highlights current issues related to the stock market and investing. He subscribe to his newsletter here for more financial information.

2) Higher pension subsidies are not a problem

“The federal subsidy is increasing to ease the burden on taxpayers. That makes sense. The question is: can we afford this financially? When I look at what we spend on pensions compared internationally, my answer is: yes.”

To put it in perspective: the federal subsidy now amounts to almost 130 billion euros. That's about a third of the federal government's tax revenue. It is money that cannot be spent on many other things (defense, infrastructure, etc.). As I write the text, Federal Finance Minister Christian Lindner (FDP) expects a savings potential of 25 billion euros. And the president of the Federal Court of Auditors, Kay Scheller, warns in an interview: “Tax revenues are no longer increasing, expenses and tasks are increasing excessively and the interest burden seems pressing to me.” We can't afford that.

But Heil thinks in different categories. His reference is not income, but the performance of the economy. This benchmark may be good for international comparability, but it is of no use if there is still not enough money (see above). And if we look closer: Heil is right that Germany's spending on pensions, measured as a percentage of gross domestic product, is just below the EU average. But it is little consolation that other countries are doing even worse than us. We should look at those who are better and think about what we can learn from them.

3) There is no alternative

“For a lawyer or a teacher this (i.e. working longer hours) may not be a problem, but in other professions it is. I recently spoke to a woman at a power plant in Eisenhüttenstadt who has been working shifts since 1983. And then it is very difficult to reach 67. “At some point I will no longer be able to do this,” she told me. It does not correspond to my ideas of justice to tell these people: you have to work until you are 69, 70 or 71 years old to be able to retire without deductions.

The starting point is really clear: we live longer and longer (that is, we receive pensions for longer), but we no longer contribute to the pension fund. It is obvious that this is not sustainable. And there are numerous suggestions from experts on how to link retirement age with increased life expectancy. The most common formula you see is 2:1, which means that if we live two more years (and receive a pension), we pay in one more year.

However, all discussions on this matter are nipped in the bud by experiences such as those described by Heil. Sometimes the roofer also symbolizes the fact that you can no longer work in some professions.

I totally see that too. Anyone who has a physically demanding job cannot work as long as they want. What I don't understand, however, is: why does the entire pension system have to be aligned accordingly? I don't know exactly what job the woman Heil talks about does at the power plant. But if we look at the age distribution of roofers, we can see that there are only 7,000 roofers working in the “56 to 60 years” group. In the “61 to 65” group there are 3,000. When we look at individual cases, I fear we lose sight of the bigger picture.

What bothers me is how one-dimensional the debate is. I never heard anything about helping these people so they can work longer. Why is Heil not surprised that the woman from Eisenhüttenstadt, despite working for decades at the power plant, continues to work in shifts and has not switched to another, less physically demanding job through further training or retraining? Nor do I hear anything about how people who practice these professions can be helped to create private pensions so that they can retire earlier and well taken care of. In the US, for example, there are pension funds for various professions. And I don't hear anything about how expensive waivers would be. We could probably even afford to retire the roofers, the power plant woman, and others earlier without deductions, if we make the system as a whole future-proof.

What I mean by this is: we are only focusing on one possible solution. We think too short. Say: “There are people who physically can no longer work. “Therefore we will not increase the retirement age” is, in my opinion, too simplistic.

Our pension is not affordable this way.

In the end, we will not be able to outwit mathematics. The pension system in its current form is not affordable in the long term. The sooner politicians like Hubertus Heil recognize this, face the truth and say goodbye to the twisted logic of wishes, the better. But we must not get our hopes up either and we must take responsibility for our retirement provision ourselves.

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