Jörn Weseberg works for the Deutsche Rentenversicherung Bund, which manages public pensions in Germany (first pillar). This institution insures about 52 million people in Germany and depends on joint contributions from employers and insured people. According to Wesenberg, the green paper will be the opportunity to see if the European Commission is really willing to learn from the crisis and will abandon its previous positions on privately funded pensions as ‘the’ solution for the demographic challenges ahead. It will also launch the debate on portability of pensions.

Which could be the main obstacles/challenges for the Deutsche Rentenversicherung Bund in the coming years?

Of course, the ageing of society is a central challenge also in Germany in the coming years. Through various reforms in the past years (beginning in 1992, then mainly 2001, 2005 and 2007) the first pillar old-age pension system was adapted to these demographical changes. Financially, the German pension system thereby has been adapted to future demographic challenges: pre-retirement was phased-out, indexation of pensions reduced and linked to the development of the proportion of people in work to those receiving old-age pensions (sustainability factor). The general pension age will start to rise from 2012 in monthly steps until 2029 by two years (then 67 years for standard old-age pension). In the future, only a combination of the state, occupational and additional private pension schemes (which have been strengthened by state-subsidised, voluntary ‘Riester’ pension schemes) will safeguard the previous standard of living in retirement.

Challenges ahead now rather concern the future adequacy of pensions: unsteady job careers combined with switches from employed to self-employed work or back often lead to gaps within the pension insurance career of a growing number of people in Germany (self-employed are mostly not insured within the first pillar scheme in Germany). The pension system will have to adapt to these labour market changes.

What’s your position on sustainability of pensions: what are your suggestions to insure that pensions could still be paid despite the ageing population and the crisis?

In Germany, first pillar old-age pensions are already closely linked to the insurance career during whole working life. Moreover, pension indexation was reduced through various reforms. The system is now financially stable and well prepared for the demographic changes ahead.

So far, the crisis has not led to a deterioration of the financial situation of the German pension insurance. This is mainly due to labour market instruments, such as ‘Kurzarbeit’ (short-time work), which buffered off declines in social security (ie pension) contributions (through additional contribution payments by the unemployment insurance) and avoided larger cuts in the workforce. Unemployment has not significantly risen so far since the crisis peaked in autumn 2008.

What are your expectations for the release of the green paper on pensions? What role should the EU play?

The European Commission will use the consultation to regain ground and influence in the reform debates on state, occupational and private pensions. All three aspects will be an issue in the document. The crisis is a welcome opportunity for the Commission to revive certain dossiers, such as the planned directive on the portability of occupational pensions. The crisis has once again proved the stability of ‘pay as you go’ financed pension systems and their necessity as a main pillar in a mix of different old-age schemes also in the future.

The Commission is right to analyse with the green paper if capital-funded private schemes and products for old-age security should be submitted to a tighter scrutiny on the EU level in terms of ‘security’. It will be interesting to see if the Commission really is willing to learn from the crisis in this respect and will abandon its old positions on privately-funded pensions as ‘the’ solution for the demographic challenges ahead.

What is the outcome of the conference on the open method of coordination (OMC) and pensions, organised in Berlin in May? How could implementation be improved?

The conference of the German federal pension insurance system (=Deutsche Rentenversicherung Bund) on the one hand has reiterated the importance the social OMC and its tools (peer reviews, joint reports, indicators) for cross-European mutual learning between member states as well as its effects for the MS-pension reforms in the past decade. The voluntary role the OMC should continue to play was also emphasised by delegates of the member states. Greater visibility and a more transparent process by better including other stakeholders (and non-governmental organisations) in the OMC process were seen as a necessary improvement by many speakers. However, the dilemma was also seen that a greater social role of the EU and a greater visibility of social aspects on the EU stage bear the risk that a shift of competence away from the MS to the EU could take place. This is not an option for Germany. Quantifiable targets were therefore dismissed by the MS and representatives of the German social security system.