Pension conflict | What a generational conflict

It's a much-discussed topic in the pension debate: the so-called generational conflict. Its essence: Older people can no longer make ends meet on their pensions, while the pay-as-you-go system forces young people to pay in more and more. They themselves will no longer benefit from the pension system in the future due to demographic trends and the aging population. The Metal Pension Youth Study concludes: This conflict certainly does not originate with the younger population.

"On the contrary, our results demonstrate great solidarity between the generations," said economist Christian Traxler at the presentation of the study at the Federal Press Conference Center on Wednesday. When asked how the statutory pension system should be stabilized, young people opted neither for reducing current pensions nor for a later retirement age. Surprisingly, as Traxler puts it, they demanded measures that affect them personally: higher contributions and an expansion of tax subsidies through federal funds. Young people between 17 and 27 strive for security in old age and want to make their own provisions, but they often lack economic knowledge. These are the key findings of the youth study.

Metallrente is a sector-specific pension fund. Originally founded by the collective bargaining parties Gesamtmetall and IG Metall for the metal and electrical industries, it now also represents other sectors. The survey, conducted since 2010, aims to promote occupational pension provision and raise awareness among young people about financial education. Occupational pension provision is one of the three pillars of the pension system, alongside statutory and private pension provision. Employees are therefore entitled to salary conversion. Portions of their wages or salary can be saved for a future occupational pension.

Overall, 88 percent of young people surveyed are saving, 54 percent of them for retirement, according to the study. Fewer and fewer are turning to traditional methods such as savings accounts. The Riester pension, in which 50 percent of savers invested in 2010, is now used by only 17 percent. Confidence in the statutory pension has also declined slightly in recent years.

This is understandable given the political back and forth, says Metallrente Managing Director Hansjörg Müllerleile. During the "traffic light" coalition government, the SPD focused on securing pension levels, while the FDP relied on the stock market and so-called generational capital. The announced pension reform was never passed.

62 percent of respondents now invest their money in stocks and funds. "This reflects not only the demand side, but also the supply side," explains Traxler. Fintechs, technologically advanced financial innovations such as cryptocurrencies, have been selling well since 2016. At the same time, 96 percent of young people view good retirement planning as a lifelong pension benefit—which is precisely what a stock pension does not offer. For 95 percent of respondents, a good pension also means that their money won't be lost in the stock market.

Such contradictions are reflected in the financial knowledge of this age group, which is at a shockingly low level, criticizes business educator Carmela Aprea. Only 55 percent of respondents knew that high returns come with high risks, and only 54 percent were familiar with diversification—that is, minimizing risk by spreading assets across different investments.

“Retirement provision must not remain an opaque labyrinth.”

Carmela Aprea, business educator at the University of Mannheim

Women are particularly likely to report being unable to answer the knowledge questions. Aprea concludes this reflects a high level of uncertainty, which could reinforce existing financial inequalities between the sexes. "This underscores the need for appropriate financial education programs," she demands. "Retirement planning must not remain an opaque labyrinth." Germany is the only OECD country without a financial education strategy.

However, those young people who don't save for retirement on their own cite not having enough money as the main reason. Theodor W. Birkwald, the former pensions spokesperson for the Left Party in the Bundestag, therefore regularly emphasized: There is no generational problem in Germany; there is a distribution problem.

Meanwhile, the SPD-CDU government plans to strengthen statutory pensions by providing incentives for longer working hours. The coalition agreement includes tax-free salaries of up to €2,000 per month, improvements to additional earning opportunities for survivors' pensions, and one-off payments through the so-called pension deferral premium. Labor market researchers such as Yvonne Lot of the Hans Böckler Foundation, which has close ties to the unions , fear this will exacerbate inequalities to the detriment of women and those in heavy labor. They would be unable to work due to care work and high workloads, thus placing them at an additional disadvantage.