The campaign of destruction against legal pension insurance provides for a constant money influx into the financial markets. Recipients of small incomes are cheated of their savings

Let nobody say that the much-vaunted „economic wise man" Bert Rürup had no social conscience. He, who for years has been handing the instruments to the killers of a poverty-resistant pension, who did not tire of drawing their ungrateful work publicly again and again into the good light and who prevented any kind of exhaustion in this endeavour by his diligent spurring, he is finally seized now. The way the pension now lies on the floor lifeless and dead and does not even stir or groan any longer, no, that after all is not good either, he may have told himself. He or she who is able to show 35 years of contribution to legal pension insurance, Rürup suddenly demands, should in any case receive „a pension slightly above the level of minimal security" when he or she gets old. Where contributions are not sufficient for that, the pension claim is supposed to be increased from tax means. Private precautionary savings from Riester contracts should not be counted in there.

Since Rürup catapulted this message into the public in an interview with the German daily 'Handelsblatt', there are furious disputes all over the country, whether it is honest to take their money away again in old age from working people who despite of low incomes saved for the Riester pension. That in fact is the consequence of the current regulation that guarantees to the retirees a pension at the level of the so-called Hartz IV receipts (the low benefits one receives after, be it without counting the incomes of spouses and kids, but only after deduction of any own incomes including also payments from private prevention. For him or her who has to count with a legal pension below the level of basic security, the whole Riester thing is therefore complete nonsense. He or she would be better off enjoying him- or herself a bit more, instead of sticking with a prevention contract, out of which he or she will never get even a cent's worth of additional pension.

Suddenly, many seem to think that such cold expropriation is not a good thing. Even the Handelsblatt, an old ally of Rürup in the struggle against legal pensions, pretends to be thoughtful: „Nobody can deny the problems that Rürup describes:" Even the general association of the German Insurance Associations (German abbr. GDV), which up to now has not been precisely noteworthy for its worry about the level of legal pension, backs the economics professor. GDV executive secretary Jörg Freiherr Frank von Fürstenwerth demands „quick political measures in order to insure that individual prevention is always worth it."

Since Rürup catapulted this message into the public in an interview with the German daily 'Handelsblatt', there are furious disputes all over the country, whether it is honest to take their money away again in old age from working people who despite of low incomes saved for the Riester pension. That in fact is the consequence of the current regulation that guarantees to the retirees a pension at the level of the so-called Hartz IV receipts (the low benefits one receives after, be it without counting the incomes of spouses and kids, but only after deduction of any own incomes including also payments from private prevention. For him or her who has to count with a legal pension below the level of basic security, the whole Riester thing is therefore complete nonsense. He or she would be better off enjoying him- or herself a bit more, instead of sticking with a prevention contract, out of which he or she will never get even a cent's worth of additional pension.

Suddenly, many seem to think that such cold expropriation is not a good thing. Even the Handelsblatt, an old ally of Rürup in the struggle against legal pensions, pretends to be thoughtful: „Nobody can deny the problems that Rürup describes:" Even the general association of the German Insurance Associations (German abbr. GDV), which up to now has not been precisely noteworthy for its worry about the level of legal pension, backs the economics professor. GDV executive secretary Jörg Freiherr Frank von Fürstenwerth demands „quick political measures in order to insure that individual prevention is always worth it."

At the latest here, one should not only hear the nightingale sing, but trumpet. What really drives the insurance industry and its eager lobbyist Rürup is by no means the pity with millions of future pensioners, who in spite of decade-long pension contributions and additional private prevention must look forward to a retirement in oppressive poverty. What worries the Rürups and Co. is the circumstance that more and more people might notice that saving for the Riester pension for them is not worthwhile and that it is better to afford a little luxury for this little money instead of relieving the social budgets of the future and feeding the insurance economy with contributions.

Because while the Riester pension might not be worth it for many of the concerned, for the insurance economy it is always worth it. Roughly ten million people have a Riester or respectively Rürup contract at present. They are supposed to become far more in the future. Maybe the majority of these contracts is over rather modest sums, but the mass does it. It provides the insurers with riskless fees and at the same time ever new play-money for their cash registers. Especially in times of financial turbulences and liquidity shortages, both should not be underestimated.

It is therefore – as in every case, when big fights take place over a topic – a matter of business. Walter Riester as well in the meantime has joined the debate. It was „simply a catastrophe", the former SPD minister for work and social affairs had sounded off in reaction to critical press contributions. What? That more and more people are going to be poor devils in old age? No, that „people are being told that it is was worth it to forgo private old-age prevention." That such discouragement is equivalent to a catastrophe is also thought by Lord Fürstenwerth, substituting for all insurance sharks in the country. And therefore Rürup demands to keep up the Riester attraction by way of a guaranteed minimal pension for all.

Beginning with a filthy compromise

As long as one discusses only the crediting or non-crediting of private pension insurance, the true scandal of today's pension system anyway stays out of sight. Because even fare more scandalous than the future expropriation of many Riester pensioners is after all the circumstance that this problem shows itself after all in this size. Who ten years ago would have demanded that people who have contributed for 35 years to the pension insurances receive a „pension only slightly above the level of social aid" would by no means have been celebrated as pioneer of the fight against poverty in retirement but as a unscrupulous social vandal. That somebody with 35 years of insurance-liable employment could expect a pension above the most miserable poverty threshold, back then at least to people with medium-level income was natural. That this no longer holds today shows mainly one thing: the complete destruction of legal pension within a decade only.

Everything had begun, like political scandals usually do: with a filthy compromise. With the promise to lower the legal pension level of the „typical retiree" of back then 70 percent to no less than 67 percent of the net wage, back then SPD labour minister Riester had wrought out of the trade unions the approval to the entry into state-encouraged private old-age prevention as „second pillar" of the pension system. It contributes little to the facts that the standard retiree with 45 contribution years already back then hardly existed any longer and that also the 67 percent were hypocritical, because they relied on a series of arithmetic tricks. Even if both had been correct: The decisive thing about this first SPD-Green pension reform were not the numbers mentioned, but the system change introduced: away from a tax-financed pension paid in equal amounts by employees and companies towards a system of private prevention by way of the capital market.

In contrast to many a leading trade unionist, the ruling class had understood the basic question and celebrated Riester's pension crime in the Frankfurter Allgemeine Zeitung by the words: „It is not a matter of the percentage value shining out of the far-away mist of the year 2030, it is a matter of a deep break with the accustomed paradigm of social policy."

By way of this cut, the dams were broken. In the subsequent period, one pension reform chased the next. The reference size of the pension was changed several times by cutting ever larger sums out of the wages, so as to keep pensions small, even in the case of increasing earnings. A demographic factor was introduced and replaced somewhat later by a so-called sustainability factor. Both had only the purpose of decoupling the development of the legal retirement age even further from wage development. The pension contributions for unemployed people were shrunk small. As a result, a Hartz IV recipient today acquires a retirement claim of a ridiculous 2.19 Euros a year. Moreover, those already retired had to shoulder an increase in the contribution to care insurance.

The future taxation of pensions is also already decided upon. The latest crime in the pension tragedy was the increase of the retirement age to 67 years. That way the legal pension claim per year of contribution dwindles further. The unemployed in the future are supposed to be forced to retire at 63 years. With hefty deductions, of course.

All these measures on the one hand lowered the living standard of pensioners up to now. Even more so, the consequences are felt by those who retire today. Following prognosis of the German Pension Insurance a legally insured whose retirement began in 2007 received up to 14.5% less pension than someone, who reached retirement under the same premises in the year 2000. And this, even though very many reforms have not even yet entered into force. Only the generation of those born in 1964 will get to feel the consequences of the increase in retirement age to 67 years in all its brutality.

Care at the lowest level

That all the measures mentioned drastically reduce the level of legal pension, not only should not surprise anyone. It was the declared purpose of the exercise. Already in March 2006, the federal government in its pension insurance report had calculated that the pension level of the „standard pensioners" in the year 2009 would sink to 49.9 percent of the wage. Until 2019, the downward slope would then continue to 46.3 percent and until 2030 to 43 percent. The next pension theft, pension at 67, was decided in full knowledge of these facts.

Today we have the situation that an average earner with a monthly gross income of 2500 Euro must pay more than 30 years of contributions into legal pension insurance to receive in the end a pension claim at the level of the Hartz IV benefits. Who has only 2000 Euro gross salary, needs more than 38 years of contribution. Low earners need to pay until they drop dead and still will never reach a pension above the poverty level.

Since only the lucky are likely to get up to more than 30 years of contributions with earnings at the level of at least average income, these numbers clearly mean: legal tax-based pension in the sense of an institution protecting even approximately against poverty in old age is dead. Everything the state still offers is a minimal care at the lowest level. He or she who wants to live his/her retirement in a half-way dignified fashion, needs to make massive private prevention – if he or she can. Rürup's proposal no longer to count private prevention towards basic security, lies completely in the logic of this system change. His realisation would finally not stop the latter, but complete it. The European country where such a private pension system with a minimal state service exists in the purest form is Great Britain. It is not an accident that it is also the Brits who from the point of view of old age poverty in the European comparison show the most terrible numbers. It is very likely, however, that they will soon receive competition. Already in mid-2007, the Organisation for Economic Cooperation and Development (OECD) had by the way publicly criticised that the German retirement system was not sufficiently insured against the threatening old-age poverty. In the case of the pensions for low earners, the Federal Republic even turned out among the worst. The OECD estimates that the share of minimal pensioners that at present lies at only 2.5 percent in the future will rise to at least 10 percent. The German Social Association even expects that over a third of all those gainfully employed today will need to cope with a pension below the level of Hartz IV.

This politically motivated poverty of our seniors is often and with pleasure justified with reference to „demographic development". Because ever fewer young people needed to feed ever more elderly, the tax system was no longer appropriate, thus the well-known litany. Among the numbers one likes to quote in this context, there belong the following: While in the year 2000, every employed person came up for exactly one non-earner, it will be, in the year 2050, 1.6 non-earners. What is being suggested by these numbers: Every earner in the future will have to stuff ever more mouthes and should therefore not be surprised if ever less stays left for him or her and them. What is willingly kept secret in that respect is that still in the year 1975, the dependent quota due to the larger number of children was much higher than today, and the relation back then will be surpassed at the earliest in the year 2022. In order to not even let this comparison come up in the first place, one likes to refer to the relation pensioners to employed that is indeed higher today than in the past and will continue to rise in the future.

Demographic pension lie

The story of the starving baker who needs to share his rolls with ever more unproductive eaters, is nevertheless a myth that relies on at least two completely crazy notions: first of all, it is assumed that the amount of dough that every baker can put in the oven, won't be any larger in 50 years than today. And second, it is assumed that the share of bakers in the cohorts in the bread-winning years will stay constant once and for all. Neither one nor the other assumption can be substantiated in a reasonable way.

The statistical indicator that measures the volume of bread per baker is labour productivity. Since 1960, labour productivity in the Federal Republic has risen on average by 2.5 percent per year. Even if we assume that this growth slows down to only one percent, every eater – young or old - given the now foreseeable change in the age structure of the population, 50 years from now will still be able to eat a piece of the pie on avaerage 12 percent as big as today. If productivity rises on average by 2 percent, each has even a third more dough at his or her disposal. And in all these calculations, it is assumed that unemployment stays as high as it is today. If in addition, more people received the possibility to share in roll, bread and pie baking, the numbers would look even better. The claim that demographic change would make a poverty-proof tax-financed pension obsolete, is thus simply a lie.

By the way, there is also no reason to assume that in a system where everyone provides for him- or herself, there should in the end be more available for distribution than in a tax-financed one. If the demographic pension lie was true, it would with equal force hit capital-financed pension. Because the living standard of the pensioners must under any conditions be produced out of current gross national product. No one wants to eat interest receipts in old age, he or she wants to eat bread, fish and meat, enjoy good wine, wear warm clothes, go to nice restaurants, travel all over the world. If such services are not made available in sufficient numbers, the most beautiful preventive insurance will turn out as an air balloon pumped by inflation.

Therefore, it is not a matter of demography, it is a matter of interests. The privatisation of old-age insurance has three large profiteers: the recipients of higher incomes, first of all, secondly, firms in general, and thirdly, financial and insurance companies in particular. These are the three interest groups that can only win from a privatised pension system and do and did do correspondingly active lobbying work.

Liquid means for financial markets

The better earners profit, because they simply do not need the tax-based pension, and to them its possible redistributive effect rather serves to a disadvantage. Among the time and location-independent constants of human savings behaviour it counts that not only the amount of savings, but also the share of the savings in income grows with the social position of a household. Saving is a luxury, which one must be able to afford , and only those can do that, whose basic needs are covered.

Precisely for that reason, households with less than half of average income as a rule do not save a cent, but are – depending on their possibilities – more or less indebted, while the savings quota increases ever more with increasing income. A state-promoted private old-age insurance therefore means as a rule that low earners don't receive anything, because for lack of savings ability they also do not receive any state funding, while the big savers in the higher ranks of the income pyramid can claim the largest part of the subsidies for themselves. Such a system, however, functions according to the classical Biblical saying: „He who has, will be given." and is, therefore, very popular among those who have. Next to the highest subsidy level of 154 Euros per year, up to 2100 Euro per year of the Riester pension can be deducted from taxes, which for a good earner amounts to a yearly subsidy of about 1000 Euros. Starting in 2008, the losses in tax revenue from this regulation alone are estimated at about 12.8 billion Euros per year.

The companies profit from the destruction of the tax-financed pension, because they earlier needed to co-finance precisely this one in equal shares. Private prevention by contrast needs to be carried by the employed himself. The destructive campaign against legal pension was often enough justified by the fact that a further increase of the pension contributions needed to be prevented. Since to the employees, it makes financially no difference, whether a higher pension contribution is deducted from their gross income or the same amount disappears into some kind of Riester police, it is completely clear: in the whole fuss about pension contributions, the only thing at issue was always only the contributions to be paid by the firms. Any percentage point, by which the so-called employer contribution can be lowered, figures for additional profits in the billions. With corresponding commitment, the economic lobby has contributed its part to brainwashing us with its myths about the obsolete tax-based system and the modernity of private prevention.

The third lobby that should actually hang Riester's portrait in a golden frame into its entrance lobbies is that of financial companies. As already mentioned, administration and interest-bearing investment of the privatised pension funds is a huge business. After all, it may not be forgotten that the share of administrative expenditures in the revenues at the private funds is considerably larger than in the case of legal pension insurance. Who insures himself privately, after all also contributes to paying the top incomes of the funds managers. Yet, it is not only a matter of that. The most important point was mentioned by the FAZ in October 2000 in its assessment of the Riester deals: „The pension reform is a positive liquidity impulse for stocks." There, the Dotcom bubble had just burst and great players in the stock business could well use liquidity.

The decisive interest consists in directing, by the world-wide trend towards privatisation of old-age prevention, a constant flow of liquidity to the financial market and that way to guarantee ever increasing quotations on the actually already hopelessly overvalued global insurance markets. In fact, the large pension funds, in particular the US-American and the British ones now belong among the most important investors on these markets, and the money collected in their cash registers has certainly contributed to the stock and bond boom of the past two decades. True is also: the more countries privatise their old-age insurance, the more money is available in order to drive quotes ever higher and to postpone the crash. The problem is only that we have to do here with a game with the logic of a chain letter, where the first – and these in this case are not primarily the millions of small preventive savers, but a small strata of super-rich private investors, who have always been playing already with stocks and bonds - draw blood for as long as ever new players can be won. But at one point, the game is over, and then comes the bad waking-up. At the latest, when more pensions need to be paid out than new contracts are added, privatised old-age insurance cannot be a prop of booming stock markets any longer. Worse even: if the quotes then drop, the beautiful paper claims for insurance can melt like ice in the summer sun.

A preview of that already occurred in the time after the turn of the century, when the burst Internet bubble and the subsequent stock-market crash left a gap in coverage of more than 300 billion Euros on the balance sheets of the US pension funds. The British pension funds complained about a pension deficit at the level of 70 billion Pound Sterling. Still in 2003, the value of all US pension funds lay far below the cash value of their payment obligations. Even the Handelsblatt noted back then with grinding teeth : „The formerly much-vaunted system – the financing of old-age care by way of the stock market – turns out to be a structural problem."

The OECD itself back then warned of a self-reinforcing downward spiral, because the growing patches of missing funds in business pension funds threatened to push the stock-market evaluations of the firms even further downward, which in turn increases the deficits of the pension insurance money invested into stocks. Generally, according to the opinion of the OECD, reforms of old-age insurance should „no longer be carried out under the assumption of safe minimal yields and lastingly rising asset values on the capital markets." When the stock-markets gained again in speed after 2004, such kind of reflections disappeared again into the drawers and file-holders. If, however, as is very likely, the present drop should continue, it will at one point no longer be possible to ignore the problem.

Privatisation of the pension, therefore, also does not mean to let a question as elementary as old-age insurance degenerate into the profit object of the financial sharks, but mainly to make the quality of life of hundereds of millions of elderly people independent of the whims of what are today quite fragile world markets rather susceptible to fluctuation.

Of course, also the tax-financed pension does not automatically guarantee a living standard of the seniors rising along with social wealth. It rather ties it to the development of wages, and if the latter sink in their purchasing power such as those in the Federal Republic have now for over a decade, then also the pensioners will be worse off, and the tax- financed pension insurances will be in dire straits. That, however, should not be a reason to accept the destruction of the legal pension system or to even embellish it, on the contrary, it is yet an argument more to finally forcefully oppose brutalised capitalism.