As part of the debate surrounding rising national debt, the CDU’s economic council has called for cuts to civil service pensions. According to a reform paper reported by “Die Welt” the council suggests that the “implicit” debts stemming from long-term pension commitments constitute a “trouble bomb for state finances”. To avert an overburdening of public budgets, the business association proposes transitioning civil service pensions to a model backed by capital and implementing a projected reduction in benefit levels of more than ten percent.
This CDU-affiliated economic council, which is not an official branch of the party, proposes a gradual shift in pension funding from relying solely on current budgetary allocations to a capital-backed system. The paper mandates that contributions must begin immediately for any newly appointed civil servants to build reserves covering both their retirement income and associated costs while they are retired. A similar capital fund must be established for current civil servants. While this systemic change will initially increase the burden on public finances, it aims to end the practice of deferring financial burdens onto the future through civil service employment.
To finance the necessary accumulation of this capital reserve, the paper argues that an adjustment downward to the level of current pension benefits is necessary. It points out that the statutory pension insurance has reduced its security level from over 55 percent since the 1990s to roughly 48 percent today. In contrast, the average current pension level stands at approximately 66.7 percent of the last gross wage and 71.75 percent for 40 years of service. Therefore, a measured, projected reduction of the benefit level-potentially into the double digits-is deemed necessary to curb financial pressures and bring the system closer to aligning with the statutory pension insurance.
The chairman of the business association, Wolfgang Steiger, told “Die Welt” that while many civil servants accept salary reductions compared to what may be possible in the private sector over their lifetime, this does not justify the current, considerable improvement in retirement benefits. He added that this is even more true when considering the criterion of job security. Thus, a phased approach toward the pension level of the statutory pension insurance isn’t just a matter of financing; it is also a question of fairness.
