Why freelancers may have to pay into the German pension fund in future

The question of how to fix Germany's struggling pensions fund is an age-old debate. Recently, however, it has become one of the key items on the desk of new Labour Minister Barbel Bäs (SPD), who must find a way to stabilise the system. 

Speaking to the Funke Media Group over the weekend, Bas proposed a major change to the current model: in future, she wants civil servants, politicians and the self-employed to all make mandatory pensions contributions, ending their current carve-out.

Currently, government employees and MPs are exempt from having to pay into the system, while freelancers and small business owners mostly do so on a voluntary basis.

Certain freelance creatives, including journalists, musicians and artists, are technically obliged to make pensions contributions under the Artists' Social Fund (Künstlersozialkasse). However, since an application is required to enter the KSK, these contributions are far from universal. 

According to Bas, far too few people are currently paying into the pensions pot while an increasing number are taking from it.

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"We need to improve the income of the pension insurance funds," she said. 

While in the 1960s, around six working-age people were paying into the pension fund for every pensioner taking out, this has slipped dramatically to a ratio of 2:1 in recent years.

With a wave of Baby Boomers entering retirement and not enough people entering the workforce, this ratio is set to get even smaller over the coming years.

Despite the problems facing the pensions system, however, the proposal was immediately slammed by the German Federation of Civil Servants. 

Ulrich Silberbach, the head of the association, told ARD that the plan amounted to a "forced unification" of the pensions fund and argued that move would become expensive for local and federal governments.

If civil servants are forced to pay pension contributions, he argued, their employers would be too - meaning extra expenses for communes, states and the nation as a whole.

The SPD's coalition partners, the centre-right CDU/CSU alliance, also voiced criticism.

"I can't find any grounds for this in the coalition agreement," Head of the Chancellery Thorsten Frei (CDU) told ARD on Sunday evening.

'No small task'

Amid the backlash, however, Bas' proposal received positive reviews from social advocacy group VdK, as well as from the Left Party, who said it could ensure an even higher pension rate for retirees. 

SPD social policy expert Bernd Rützel also backed Bas’s plan over the weekend, pointing out that it aligns with the long-standing policies of the party.

Rützel, formerly chair of the Bundestag’s Labour and Social Affairs Committee, told the Augsburger Allgemeine that the reform would promote fairness by ensuring everyone contributes to the system.

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“What’s fair is that all make a solidarity-based contribution,” he said.

Nevertheless, Rützel cautioned that incorporating new groups like civil servants and the self-employed would be complex and require a lengthy transition period.

“It’s no small task,” he added.