Retirement Pension in Germany: July Increase Benefits Some, but Not All

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Berlin. On July 1st, 21 million pensioners in Germany will receive more money. Statutory pensions are rising significantly, although not as much as prices. Hundreds of thousands of seniors with special low pensions ultimately come up empty-handed. An overview.

How much will pensions increase?

As of July 1st, statutory pensions will increase by 4.39 percent in the west and 5.86 percent in the east. This is what the federal cabinet decided at the end of April. The pension increase turns out to be quite strong. The reason for this is the fact that the labor market is proving to be robust despite the weak economy and wages are rising.

From now on, the same pension value applies throughout Germany. For the first time since German reunification, there is a uniform amount for a pension point in West and East, namely 37.60 euros. If an employee earns exactly as much as the average employee in a year, the pension insurance writes him a pension point good. If there are deviations up or down, there are more or less than one point accordingly. The amount of the old-age pension is based on the sum of the pension points that an employee accumulates during his or her working life.

Is the pension increase enough to offset high inflation?

No. The Prices are still rising faster than pensions – just like last year, when Russia’s attack on Ukraine dramatically accelerated inflation. For 2023, experts expect an inflation rate of around six percent. The rise in food prices is still particularly severe. In the case of energy, on the other hand, the buoyancy has weakened significantly.

Will every retiree benefit from the pension increase in the middle of the year?

Generally, yes. However, there are numerous pensioners who, starting in July, will receive just as much money every month as before. These are the so-called booster – i.e. people whose retirement income is so low that they need additional help from the social welfare office. In addition to their pension, they also receive the so-called basic security in old age.

This service is paid for from taxes and serves to support the socio-cultural subsistence level guaranteed if your own income is not sufficient. The Ministry of Social Affairs of Department Head Hubertus Heil (SPD) confirms: “If the income and thus the pension increases, the need for additional basic security in old age and in the case of reduced earning capacity decreases at the same time.” This means that the pension for this group is now also increasing, the supplementary basic security is immediately reduced accordingly.

Pension: How many seniors receive basic security?

Last December there were around 660,000 people of retirement age in this country basic security based. That was almost 70,000 people or around twelve percent more than in the same month last year. However, not only older people with a small pension are eligible to apply. But since June 2022, for example, also for war refugees from Ukraine of retirement age. The standard rate for basic security is 502 euros per month for single people plus accommodation costs.

How does the Ministry of Social Affairs explain that the bottom line is that the pension increase for poor senior citizens does not arrive?

The ministry argues that the total income of top-up pensioners also increased: “The currently significant increase in expenses for accommodation and heating are taken into account immediately, insofar as they are appropriate.” consumer prices and wages adjusted. “Accordingly, the standard rate for adults living alone was raised from 449 euros to 502 euros on January 1, 2023. This increase of around 12 percent – ​​which also applies to couples living together – exceeded the current pension adjustment as of July 1, 2023 and also benefited those receiving basic security in old age.”

Pension increase: what does the opposition say?

Left parliamentary group leader Dietmar Bartsch told our editors: “It is normal for pensioners who depend on basic security in old age to regularly look down the drain when the pension increases in July unacceptable. we need one poverty-proof minimum pension from 1200 euros in Germany.” In the Netherlands, for example, there is an old-age security that is even higher. Bartsch added: “A poverty-proof minimum pension must not be decoupled from the annual pension adjustment. The pension increase must be recognized and may not be offset. The federal government is currently saving at the expense of the insured.”

How do associations react to the pension adjustment?

The chairwoman of the board of directors of the Social Association Germany (SoVD), Michaela Engelmeier, told our editors: “The pension adjustment on July 1 is initially a good thing, but it also has its uses downsides.” The increase will be eaten up by inflation, which is particularly dramatic for millions of small pensioners. Targeted support and relief measures are necessary. Engelmeier added: “Anyone who only has a low old-age income must be placed in a pension allowance in the basic security in old age so that the total income is well above the basic security level. This must also apply in the case of reduced earning capacity.”