Discussions about pensions are not very pleasant at the moment. This is particularly evident in the election campaign. Instead of waiting for politicians, people in Germany should take action themselves and build up assets to supplement their very low pensions in old age. Real estate is a suitable means of doing this.
The parties' pension promises currently do not reveal how they are to be financed. This is shown by a recent analysis by the ifo Institute, which refers to the programs of all major parties.
Pension insurance is financed on a pay-as-you-go basis, i.e. current expenditure is largely financed from current contribution income. In the coming years, the number of pension recipients will continue to rise in relation to the number of contributors. Reforms are urgently needed to secure the financing of pensions in the long term. Legislation guarantees a pension level of at least 48% of average income until 2025. No lower limit has yet been set for the period after 2030.
In a European comparison, the German pension level is below average: in Denmark it is 80 percent, followed by Luxembourg with 76.6 percent, Portugal with 74.9 percent, Italy with 74.6 percent, Austria with 74.1 percent and France with 60.2 percent.
Every citizen in Germany has to close the gap between their usual income and their pension themselves. Many are already doing so. "Retirement provision" remains the dominant savings motive for people in Germany, according to the key findings of the Autumn 2024 survey commissioned by the Association of Private Building Societies. However, the savings motive "home ownership" has fallen by eleven percent compared to the same month last year. This is the sharpest decline since spring 2008.
Conclusion: High prices for existing properties and rising interest rates have made buying a property more difficult since 2022. Nevertheless, real estate is a particularly good protection against poverty in old age, one of the safest forms of investment and a good recommendation for people who want to provide for their old age.
Photo / graphic: © Ingela Skullman, Pixabay
