From 2006 to 2016, elderly poverty in Germany (people older than 55 years old) increased from 4.5 to 5.6 million people. According to the German Institute for Economic Research (DIW), the percentage of people who face poverty while receiving retirement money could increase from 16.8% to 21.6% by 2039. In other words, one in five German pensioners could face impoverished conditions by 2039. Germany intends to combat elderly poverty with a basic pension plan.

Elderly Poverty in Germany

People who receive “less than 60%” of their average working salary from their retirement funds are currently considered at risk of facing poverty. This equals a monthly retirement income of less than €905 or $997. The percentage of people depending on other financial government assistance may also rise from 9% to 12% by 2039. These people would have monthly retirement incomes of no more than €777.

3 Main Pension Systems

A German pensioner can choose from three main pension systems. The German pension apparatus consists of a “pay-as-you-go system,” which is combined with other supplemental plans. The supplemental pension plans intend to provide funds in addition to the state pension that pensioners already receive.

1. State Pension. This pension plans awards about 70% of net income to people older than 65 who have been working in Germany for at least five years. Enrollment in the state pension plan is mandatory for everyone working in Germany.
2. Company Pension. The company pension plan is a plan workers can monetarily contribute to via the employer. The plan intends to augment the state pension plan and has become the most popular retirement plan in Germany.
3. Private Retirement Scheme. This plan is established through insurance organizations and banks. The German government promotes these plans through tax incentives and bonus benefits.

Despite the three main pension plans that Germany has implemented, those working for a lifetime in Germany still struggle to make ends meet after retiring. This is especially relevant for those employed in low-earning careers.

The Basic Pension Plan

Since the amount of state pension given to a pensioner depends on their net income, those who participated in low-earning jobs are at increased risk of facing poverty. To address this, Germany recently decided to implement a new basic pension plan, which ensures that those who have been working in Germany for a significant amount of time will receive a basic amount of pension.

In January 2021, the German federal government enacted the basic pension plan to combat elderly poverty in Germany. This plan guarantees that individuals who have contributed to the German state pension system for a minimum of 35 years receive a basic pension in addition to their original state pension. The additional basic pension ensures that the pensioner has enough money to pay for fundamental necessities. No application is necessary as the government utilizes an automatic system for these basic pension benefits.

According to German legislator Malu Dreyer, more than 1.4 million people will benefit from the basic pension plan. Furthermore, a significant portion of women will benefit from the plan as four out of five beneficiaries will be women. The plan also rewards those who took time off work for familial caretaking as long as their total employment time meets the minimum requirements.

Looking to the Future

In hopes of decreasing elderly poverty rates, Germany implemented the basic pension plan, which aims to provide its low-earning citizens with enough funds to secure their basic needs after retiring. The state pension only provides the pensioner with 70% of their net income, which can be problematic for citizens who spent their lives working in low-paying positions.

The German government estimates that the plan will benefit more than 1.4 million people, providing hope that more than a million elderly citizens will not live the remaining years of their lives in poverty. Overall, the German government presents a clear path ahead for combating elderly poverty in Germany.

– Lauren Spiers
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