Germany’s macroeconomic framework over the past year was overshadowed by inflation, high interest rates and a recession. The average rate of inflation in 2023 was 5.9 per cent, and the European Central Bank’s yearend base rate was 4.5 per cent. This, coupled with the shortage of skilled employees, put many companies in a difficult position. Despite all the challenges, however, the number of employees subject to social insurance contributions reached a historic high of 35.1 million in November 2023. This phenomenon was caused by a combination of demographic change and high demand for skilled labour. It resulted in many companies focusing on employee retention.
Contribution revenue bucks the economic trend
Despite the weak German economy there has been a sharp increase in pension insurance contribution revenue. There are two reasons for this: the positive development of wages and the higher number of people in gainful employment. As a result, contribution revenue was 14 billion euros higher compared to 2022. The financial result reports total revenue for 2023 of approximately 381.2 billion euros, which represents a 5.0 per cent year-over-year increase. Growth in expenditure was higher than growth in revenue, primarily due to the 5.5 per cent rise in pension expenditure. According to the financial result, and taking all factors into account, expenditure in 2023 was up 5.6 per cent to 379.8 billion euros.
“The robust financial position is primarily attributable to the stable labour market.”
Reserve equivalent to 1.7x monthly expenditure
In absolute terms, revenue was higher than expenditure, which is why the sustainability reserve grew to 45.0 billion euros on 31 December 2023. That is 2.3 billion euros more than in the previous year and ensures that the reserve remains above the legally prescribed corridor of 0.2x to 1.5x monthly expenditure. The sustainability reserve is used to compensate mid-year fluctuations in liquidity due to cyclical and seasonal influences.
Pension adjustment
The upward adjustment of pension value on 1 July 2023 was higher for eastern Germany than it was for western Germany. This resulted in the harmonisation of the current pension value for eastern Germany with that of western Germany in 2023, one year earlier than planned. The current amount of pension paid for each earnings point in 2023 is 37.60 euros.
