The Boomer Solidarity Surcharge: An Important Tool for Stabilizing Pensions Without Directly Burdening Younger Generations
Stefan Bach,
Maximilian Blesch,
Annica Gehlen,
Johannes Geyer,
Peter Haan,
Stefan Klotz and
Bruno Veltri
DIW Weekly Report, 2025, vol. 15, issue 29, 167-176
Abstract:
As the baby boomer generation enters retirement, the payas- you-go pension system in Germany is under an increasing amount of pressure. Relevant changes, in particular higher contribution rates or lower pension levels, are causing tension between generations: Either the financial burden on the younger generations is increased or the risk of insufficient pensions and old-age poverty for the elderly rises. This Weekly Report analyzes two different reform approaches that would result in redistribution within the older generations: A progressive devaluation of pension entitlements as proposed by the German Council of Economic Experts and the “boomer solidarity surcharge” suggested here, a special surcharge on all retirement income above a defined tax allowance. While redistribution within the pension insurance system would be a long-term process, the special surcharge could be implemented immediately. Both measures would improve the financial situation of low-income pensioner households without directly burdening the younger generations. If the special surcharge applies to all retirement and property income, a broad redistribution with only a moderate burden on higher income groups would be possible.
Keywords: pension system; demographic change; redistribution; taxation; microsimulation (search for similar items in EconPapers)
JEL-codes: H55 I38 J18 J26 (search for similar items in EconPapers)
Date: 2025
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DIW Weekly Report is currently edited by Tomaso Duso, Marcel Fratzscher, Peter Haan, Claudia Kemfert, Alexander Kritikos, Alexander Kriwoluzky, Stefan Liebig, Lukas Menkhoff, Karsten Neuhoff, Carsten Schröder, Katharina Wrohlich and Sabine Fiedler
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