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Germany to cut pension contributions, free up 1.3 billion euros - sources

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Germany to cut pension contributions, free up 1.3 billion euros - sources

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BERLIN (Reuters) – Germany plans to reduce the combined pension contributions it takes from employers and employees by a total of 1.3 billion euros (£1.1 billion) in 2018 due to record-high employment and a rising level of reserves, government sources said on Friday. The contributions for 2018 that both employers and employees pay into the public pension system will be lowered by 0.1 percentage points to 18.6 percent of the total wage package, government officials told Reuters on condition of anonymity. That means employers and employees, who roughly share the contribution, will have about 1.3 billion euros more next year, the government officials said. The exact figures will be agreed after the government has published its updated tax revenue estimates due on Nov. 9, the officials said. The cabinet could then formally agree the reduction on Nov. 22. According to calculations thus far, pension contributions were meant to remain stable at 18.7 percent until 2021 and then rise to 18.9 percent in 2022 due to Germany’s rapidly ageing society. Despite a recent rise in the birth rate and the arrival of more than a million migrants, experts estimate the working age population, whose pension contributions support the growing number of retirees, will shrink massively in the next decade. Employers in Europe’s biggest economy often complain about the high level of pension contributions and regularly urge the government to lower the level. A survey of Germany’s DIHK Chambers of Industry and Commerce showed on Thursday that companies view rising labour costs as one of the principle risks for future growth.

(Reporting by Holger Hansen; Writing by Michael Nienaber; Editing by Hugh Lawson)
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