Germany's news in English

Editions:  Europe · Austria · Denmark · France · Germany · Italy · Norway · Spain · Sweden · Switzerland

Old-age poverty in Germany ‘set to rise significantly’

Share this article

Old-age poverty in Germany ‘set to rise significantly’
Pensioner poverty is expected to rise significantly in Germany. Photo: DPA
10:11 CEST+02:00
More than every fifth pensioner in Germany will face financial insecurity in the next 20 years, according to a new study.

The proportion of pensioners at risk of poverty could rise from 16.8 to 21.6 percent by 2039, according to research published on Thursday by the German Institute for Economic Research (DIW Berlin) on behalf of the Bertelsmann Stiftung. 

That’s the case even if the economy remains in good shape, researchers say. Groups particularly affected are low-skilled workers, single people – especially women – and people who’ve experienced long periods of unemployment. 

Christof Schiller, head of the study, said: "Even if the labour market develops positively, we must expect a significant increase in poverty among the elderly in the next 20 years.”

Schiller called for reform of the pensions system.

Someone in Germany is generally deemed to be living in poverty if they live in a household with an income below 60 per cent of the current median (or typical) household income, although other factors are taken into account. According to the study, these are people whose monthly net income is less than €905.

READ ALSO: Pensioners working more to avoid 'old-age poverty'

The proportion of pensioners who are dependent on the state to secure their livelihood could rise from the current nine percent to just under 12 percent by 2039. 

The DIW study found eastern German pensioners will have to cope with a particularly severe increase. The number of pensioners dependent on the state in eastern regions is currently a fairly low 6.5 percent –  probably as a result of higher female employment during the GDR era. But it could almost double to just under 12 percent by 2039.

What are the reasons for old-age poverty?

Precarious employment, part-time work, fixed-term contracts and breaks in working life for mothers can lead to financial struggles later in life. 

The pension system is also under pressure as the population gets older. The current research uses data from 2018 that shows there are 31 people aged 67 and over in every 100 people of working age – and this could rise to 47 after the baby boomers enter retirement in 2038.

The study lays bare the problems that lie ahead. Social security and how to deal with an ageing population are high on the agenda of Germany’s ruling coalition, made up of the centre-right Christian Democrats (CDU/CSU) and the centre-left Social Democrats (SPD).

Earlier this year, Labour Minister Hubertus Heil, of the SPD, presented his plan on introducing a basic pension (Grundrente) in Germany. It would see people who have clocked up 35 years of work, raised children or cared for relatives receive a supplement to their pension. It is intended to help those who receive a small pension.

READ ALSO: From climate action to 'Soli tax': What you need to know about Germany's planned changes

But the Union is opposed to the basic pension being paid if the person concerned is not in need - for example, if that person has a partner with a good income who can support them. However, Heil insists on the model without means testing to avoid bureaucracy.

According to the study authors, the coalition plans, even without means testing, would not be "sufficiently targeted" to help those in need.

Photo: DPA

If implemented, the plans would limit the poverty risk rate to 18.4 percent by 2039, but many people would still fall through the net.

Schiller suggested adding a simple income test to Heil’s plans, which would ensure that only low-income households are taken into account, but would keep the administrative burden low.

He also said there should be more flexibility, which could help pensioners whose working lives have been interrupted by longer breaks in employment.

READ ALSO: How Germany plans to fight its drastic shortage of care workers

The report is primarily based on data from a representative survey of the German resident population (SOEP) conducted annually since 1984.

Financial problems in old-age are a worry for the majority of Germans.

A study by the Ernst & Young consulting company published at the start of 2019, found more than half of all Germans have a fear of living in poverty later in life.

A total of 56 percent of respondents said they were very or slightly scared of financial insecurity in old age, an 18 percent jump from 2017.

Vocabulary

Old-age poverty - (die) Altersarmut

Pensioners - (die) Rentner 

Labour market development - (die) Arbeitsmarktentwicklung

Precarious employment - prekäre Beschäftigung 

Unemployment (die) Arbeitslosigkeit

We're aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Do you have any suggestions? Let us know.

 
Get notified about breaking news on The Local

Share this article

 

The Local is not responsible for content posted by users.
Become a Member or sign-in to leave a comment.