Germany Cuts Pension Contributions by 1.3 Billion Euros

Germany plans to cut total pension contributions collected from employers and employees by a total of 1.3 billion euros next year, thanks to record-high employment and growing reserves, government sources said on Friday.

Contributions for 2018 paid by both employers and employees into the state pension system will be reduced by 0.1 percentage points, to 18.6 percent of gross wages, sources who wished to remain anonymous told Reuters.

This means that employers and employees, who roughly share the burden of contributions to the pension system, will have about 1.3 billion euros left in their wallets next year, government officials said.

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They also added that specific figures will be agreed upon after the government publishes updated estimates of tax revenues on November 9. The government is expected to officially approve the reduction of these contributions on November 22.

According to previous calculations, pension contributions were expected to remain unchanged at 18.7 percent until 2021 and increase to 18.9 percent in 2022 due to the aging population in Germany.

Despite a recent increase in the birth rate and the arrival of more than a million migrants, experts estimate that the working-age population, whose pension contributions support an increasing number of retirees, will significantly decrease in the next 10 years.

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Employers in the largest European economy often complain about high pension contributions and regularly appeal to the government in Berlin to lower them.

A survey by the German Chamber of Industry and Commerce (DIHK) showed on Thursday that, according to employers, the rise in labor costs is one of the main risks for future economic growth.