Grundrenten compromise: That's what the coalition has agreed

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Who receives the basic pension? How is the claim for performance examined and what has the Grand Coalition still agreed on? An overview of the key points of the compromise between the Union and the SPD.

Anyone who has worked should have more in old age than the basic security – that is the goal of the basic pension. It should be introduced on 1 January 2021. It then applies to people who are already retired and future retirees. The basic pension is a supplement to the pension entitlements of low earners, who have 35 years of contributions through work, child rearing or care. They are almost as if they had worked for 80 percent of an average wage in those 35 years.

The contributions to the pension fund must be between 30 and 80 percent of the payments of an average earner. The pension entitlement is then doubled for 35 years, but no more than 80 per cent of the pension that the average earner earns in these years. Of the pension supplement still 12.5 percent are deducted. Thus, the coalition wants to uphold the so-called equivalence principle, according to which the pension actually depends on the amount of contributions.

The basic pension should reach between 1.2 and 1.5 million people and flow from 2021 onwards. According to SPD leader Malu Dreyer especially women benefit from the basic pension.

The coalition wants to prevent people from receiving the basic pension, even though they have a livelihood from other sources. Therefore, the basic pension is paid up to a monthly income of 1250 euros for single persons and 1950 euros for couples, the basic pension in full.

The basis for this is "the taxable income plus the tax-exempt portion of the pension and all capital gains". The form in which life insurance payments are taken into account should be clarified during the legislative procedure. Income reconciliation should be automated by electronic data exchange between the pension insurance and the tax authorities.

The housing allowance will be introduced in an amount of about 80 million euros, so that an improvement in the basic pension is not offset by a reduction in the housing allowance. For retirees with 35 contribution years, a basic allowance is introduced in the basic insurance, up to which pension payments are not deducted from the basic pension. Similar things already exist for income from occupational and private pensions. The allowance amounts to 100 Euro per month plus 30 per cent of the additional pension payments – at the most, however, up to half of the basic insurance rate, currently € 212.

The costs of the basic pension as well as the allowances in the basic security and the housing allowance "are financed from taxes and without increasing the contribution in the pension insurance". The federal subsidy to the pension fund will be "increased accordingly". The costs are not quantified in the paper on the cabinet resolution. CSU boss Markus SOder spoke of 1.1 to 1.5 billion euros. An important contribution to this is the "agreed financial transaction tax".

The coalition will be the Contribution to the unemployment insurance slightly lower, from the current 2.5 percent of gross wages to 2.4 percent by the end of 2022. It has already been decided that this contribution should rise to 2.6 percent thereafter.

In addition, the coalition strengthens the employer-funded pension through new incentives. Beneficiaries of occupational pensions or capital benefits should be relieved of health insurance contributions. So far, you have to pay the full contribution rate of 14.6 percent plus additional contribution, while the pension is only half the contribution rate due – as for employees in working life too. The coalition wants to create an allowance of 155.75 euros per month for such pensions. Thus, it is achieved that about 60 percent of pensioners "de facto paid a maximum of half the contribution rate" on their total pensions, while the other 40 percent "noticeably relieved" would.

The coalition committee also agreed to grant a loan to the Kreditanstalt fur Wiederaufbau Equity funds for future technologies up to € 10 billion, especially in the areas of digitization and climate technologies.

With information from Reuters



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