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Jochen Pimpertz / Maximilian Stockhausen IW-Trends No. 3 9. September 2019 Old-age Income Support Instead of a Universal Basic Pension: Reaching the Right Target Group

The proposed universal basic pension (Grundrente) is intended to acknowledge the contribution to society made by indigent pensioners during their working lives. However, a higher pension without a means test would in four cases out of five mean misdirecting aid to those not in need.

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Reaching the Right Target Group
Jochen Pimpertz / Maximilian Stockhausen IW-Trends No. 3 9. September 2019

Old-age Income Support Instead of a Universal Basic Pension: Reaching the Right Target Group

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German Economic Institute (IW) German Economic Institute (IW)

The proposed universal basic pension (Grundrente) is intended to acknowledge the contribution to society made by indigent pensioners during their working lives. However, a higher pension without a means test would in four cases out of five mean misdirecting aid to those not in need.

Even in cases where the current statutory pension entitlement is lower than the entitlement to basic provision (Grundsicherung), as part of a combined household income the pension still usually succeeds in averting old age poverty. It would therefore make more sense to deduct a personal allowance from the means test, irrespective of the type of income involved. An allowance of up to 200 euros per month would benefit almost all those originally identified as potentially needing assistance if they simultaneously claimed basic provision. However, this would involve the needy being treated differently depending on their individual income in old age. Alternatively, to avoid this unequal treatment, the standard rates of old-age basic provision could be raised for all indigent pensioners. While it would raise the number of potential beneficiaries, this should be interpreted less as an alarm signal than as an indication of an effective old-age pension system. To increase acceptance of income support as part of Germany’s social security architecture, the means test needs to be designed to appear less humiliating.

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Reaching the Right Target Group
Jochen Pimpertz / Maximilian Stockhausen IW-Trends No. 3 9. September 2019

Jochen Pimpertz / Maximilian Stockhausen: Eine Frage der Reichweite und Treffsicherheit

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German Economic Institute (IW) German Economic Institute (IW)

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