Pensions – On sham debates and a pension system that needs a proper pay-as-you-go system
For Fokus, there is no acute need for action with regard to a far-reaching reform of pension contributions. The debate initiated by the government is more detrimental to dialog and cohesion than it is purposeful and urgently needed.
The 2012 reform has already provided for adjustments for Fokus, which will take effect in the future and will already lead to some deterioration. If there is a need for action and the government wants to carry out further reforms, it is up to the government to take responsibility and draw up proposals. The fact that it is not currently doing this, although it has created facts quickly and without debate in other areas (e.g. the “Heescheverbued”), is due to the fact that this is more of a sham debate than a situation with an urgent need for action.
Nevertheless, Fokus would like to take the current debate as an opportunity to have a much-needed debate about growth in Luxembourg and to incorporate it into the pension debate.
The generation contract and the pay-as-you-go system
The current system is based on the so-called pay-as-you-go system. The young working generations finance the pensions of those who no longer work. This system is based on the fact that the increasing number of amounts to be paid out, which are also increasingly being paid to pensioners abroad, are generated by a working population on Luxembourg territory. This snowball system therefore requires a constant growth of contributors (working people). As Fokus has already pointed out several times, this growth (follow-up costs) costs the state more and more, especially if growth is blindly promoted and demanded as it has been up to now.
FOKUS. is not an anti-growth party, but our proposals are aimed at promoting honest and sustainable growth. We believe that the current growth, based on more and more cross-border workers and immigration, is not sustainable. In addition to the ever-increasing expenditure on infrastructure projects to cope with the flow of cross-border commuters, the increasing number of pensions that will be transferred abroad in the future without any economic equivalent will place a heavy burden on the pension fund and the Luxembourg economy.
In order to make the pay-as-you-go system sensible and more sustainable, Fokus is therefore calling for a pension system that takes the generational contract into account … and does so sensibly. This is not about reducing contributions (see introduction and conclusion), but about a fundamental rethink in the pension debate. Accordingly, we want to offset the pension with a factor that takes into account the number of own children working in the Luxembourg labor market. Only in this way would Luxembourg finally do justice to the pay-as-you-go system: the principle of pensions is based on a society building up and supporting future generations in order to secure its own pension system. This is not happening in Luxembourg. The pension system is financed by an increasing number of cross-border commuters whose contributions are later paid abroad without any connection to the Luxembourg labor or economic market. The system is also financed by immigrants, whose numbers are intended to compensate for the increasingly dwindling birth rates. This “Luxembourg” pay-as-you-go system is on shaky ground and requires constant imported growth, the sustainability and continued existence of which is more than questionable.
A calculation model like the one proposed by Fokus would apply equally to cross-border commuters, foreigners and Luxembourgers. It would lay the foundation for a new way of thinking.
In addition, Fokus would also like to create incentives for older people who volunteer in society. Here, too, Luxembourg has acute potential for improvement. In addition to the “biergerlechen Déngscht” for younger generations, incentives for older people could strengthen volunteering and promote cohesion. Just as the number of active children should be taken into account, we are also calling for a pension model in which voluntary work is included in the calculation of contributions. A so-called citizen’s allowance for pensioners would allow people to supplement their pension depending on the voluntary work they do and regardless of the number of children they have.
The two demands are not aimed at cutting existing pensions or making major savings in pension expenditure. However, they offer new ways of thinking and would adapt the pension system to realities and challenges.
Should the government nevertheless consider short-term cuts, Fokus will be on the side of those who prefer new sources of revenue to cuts or deterioration in pensions. In its election manifesto for the parliamentary elections and the European elections, Fokus had already identified new avenues for more meaningful growth and new financial revenues. The state still has great potential to generate new sources of revenue or improve existing ones.
Rather than discussing short-term contribution cuts in sham debates today, Fokus would like to focus on the actual problems of the system and discuss sustainable solutions: a pay-as-you-go system that lives up to its name; a pension system that is secure without being hostage to imported growth, a system that is based on solidarity and commitment to the community.
Luxembourg, 27.11.2024
