2023 was a difficult year for the German economy, overshadowed by rising prices, high interest rates and a shortage of skilled employees that kept both citizens and businesses on tenterhooks. How did the German Pension Insurance’s finances fare in this environment?
Gunkel: The German Pension Insurance’s financial position is still strong. One of the main reasons for this is the continued steady increase in our revenue from employment subject to contributions. We are benefiting from last year’s wage increases and the fact that more people than ever before are in employment subject to social security contributions. These developments drove the 5.0 per cent growth in revenue between 2022 and 2023 to 381.2 billion euros. On the other side, expenditure has increased by 5.6 per cent to 379.8 billion euros – and our net profit for 2023 is 1.5 billion euros.
Piel: Pensioners benefited from another pension increase in 2023. On 1 July 2023, the pension value for eastern Germany went up by 5.86 per cent and the pension value for western Germany by 4.39 per cent. The pension adjustment served to harmonise the pension value for the entire country. This is an encouraging development, particularly since a uniform pension value for the entire country has been achieved one year earlier than envisaged by law. And there is more positive news in connection with the 2024 pension adjustment. On 1 July 2024, the current pension value was raised by 4.57 per cent to 39.32 euros. In retrospect, pensioners have seen a significant increase in their pensions since 2010, and the rate of increase has been consistently higher than the rate of inflation in the same period. However, prices have risen more sharply than pensions and wages in the past two years. From this year onwards, the tables are expected to turn and pension growth will be higher than price inflation again.
Anja Piel has been Alternating Chair of the Federal Board of Deutsche Rentenversicherung Bund representing the insured persons since 20 August 2020.
Alexander Gunkel has been Alternating Chair of the Federal Board of Deutsche Rentenversicherung Bund representing the employers since 1 October 2005.
As part of its spending cutbacks, the German government decided to curtail its subsidies to statutory pension insurance funds. What impact does that have on the German Pension Insurance’s finances and on contribution payers?
Gunkel: In addition to the abolition of special payments totalling 500 million euros per year between 2022 and 2025, the legislator has now curtailed federal subsidies by a further 1.2 billion euros per annum between 2024 and 2027 for the purpose of budget consolidation. In other words, the government is balancing its budget with the contributions paid by employees and employers subject to social security contributions. When government subsidies are curtailed, pension insurance revenue also declines.
Piel: To ensure continuity of pension payments, the funds in the sustainability reserve are now being drawn down faster. This could result in contribution rate increases being brought forward or being higher than previously forecast. The faster depletion of the sustainability reserve and the necessary upward adjustment of the contribution rates mean that the federal government is indirectly accessing the contributions paid. It is consolidating the federal budget at the contributors’ expense.
The election for the social security institutions’ self-government bodies was held last year. Why do you have this election and what has happened since?
Gunkel: The election takes place every six years and it is a democratic mainstay of the German social welfare system. It enables insured persons, pensioners and employers to determine German pension insurance policy – to a great extent without political interference! Members were elected to the representative assemblies of the pension providers on 31 May 2023. Since then the self-government bodies have been constituted and their honorary members have taken up their work.
How do people benefit from this self-government model?
Piel: The self-government bodies make important decisions on financial, organisational and HR matters, as well as on German Pension Insurance benefits. Here’s an example: During the previous term of office, the self-government bodies decided to optimise rehabilitation for children. Since then, children and young people have had access to additional outpatient rehabilitation options. This allows them to remain in their social environment during the rehabilitation treatment. The upper age limit for the accompaniment of children during rehabilitation, for example by a parent, was also raised from the child’s 10th to 12th birthday. Another task performed by the self-government bodies is the nomination of the insurance advisers who work on an honorary basis in their neighbourhoods supporting insured persons by accepting applications and answering questions about pension claims.
You mentioned rehabilitation. This mainstay of the healthcare system was also affected by the COVID-19 pandemic. How has it fared recently?
Piel: During the pandemic clinic operations were obviously a challenge, which is evident by the number of medical rehabilitation treatments provided. In the years before the pandemic the figure was regularly above the million mark. In 2020 only around 866,000 rehabilitation treatments were provided. However, since then, rehabilitation figures have been continuously rising and in 2023 we were back up to 994,000. Some of these rehabilitation treatments are provided to people suffering from the long-term effects of COVID-19. I’m happy to say studies show that the German Pension Insurance’s post-COVID rehabilitation measures are becoming increasingly effective at alleviating symptoms and helping people to get fit for work again. They also facilitate occupational participation.
Last year, the self-government bodies made four binding decisions putting legislation to strengthen rehabilitation services into practice. What exactly were those decisions?
Gunkel: In 2023, the self-government bodies made binding decisions in the form of special sub-statutory regulations in connection with the new procurement law for medical rehabilitation services, thus substantiating the legislative provisions. Insured persons now have a greater say in their choice of rehabilitation clinic. A new portal is also available to help simplify the process of searching for a clinic. Users can find and compare all clinics offering rehabilitation services for their specific indication on the portal. Quality is a particularly important search parameter and all clinics are assessed on the basis of standard criteria. The assessment results are published on the portal as a source of information for insured persons. Basically, the portal makes it considerably easier to find a suitable clinic and exercise the statutory elective right.
The digital transformation is a big talking point and a mega trend that has now also caught up with German Pension Insurance. Can you give us some insights into the areas where digitalisation has gained relevance?
Piel: The German Pension Insurance is continuously expanding its range of digital offerings. One obvious example is the Rehabilitation Portal we just mentioned. Another is the Digital Pension Overview that we launched last year, providing users with access to information about all their personal pension entitlements under statutory, occupational and private pension insurance schemes on their smartphone, tablet or PC. The introduction of our digital Customer Portal is another milestone. It allows insured persons and pensioners to submit applications, view important documents and receive electronic mail around the clock. The portal access figures speak for themselves. Between the go-live in August 2023 and the end of the same year, almost 140,000 people had registered as users and there had been more than 2.1 million views.
Gunkel: The admin teams also benefit from the digitalisation of our business processes because many tasks can now be performed far more efficiently or automated to a greater extent. Particularly bearing in mind the two-fold demographic challenge, i.e. the imminent retirement of people born in high birth-rate years as well as the retirement of many pension insurance system employees, the digital transformation is essential for the German Pension Insurance in many respects.
