Serious Worries about Old-Age Poverty


December 2019

The question how secure the government pension scheme is has preoccupied the German public for quite some time. As early as 1986, ahead of the general elections, the Federal Minister of Labour, Norbert Blüm, tried to reassure the public, and he did so again during a parliamentary debate in 1997. But today, Germans are no longer convinced that their pensions are secure, and a recent poll conducted on behalf of Deutsche Bank revealed a low level of trust in the statutory pension scheme. According to its findings, more than half of the respondents between 20 and 65 years of age are worried about old-age poverty, and no less than 54 percent dread a collapse of the pension system. Inversely, only 17 percent believe that the statutory pension will provide adequate security in old age. (source:

The survey evidence illustrates the significance of buying additional private retirement insurance. Most of the survey respondents themselves see it the same way, as 71 percent of them consider private retirement planning necessary. As far as private pension insurance schemes go, the vast majority cite security as their chief priority – with real estate deemed a particularly safe investment product. This suggests that most people continue to have homeownership high on their list when it comes to financial security in old age.  

Housing Development Subsidy to Be Raised

Still, the homeownership rate in Germany remains frozen in place. Although the Federal Government set itself the goal of supporting the acquisition or construction of owner-occupied residential property, the housing policy of the incumbent administration has consisted primarily of regulatory interventions in landlord-tenant law, which is anything but helpful to boost the acquisition of property. A short while ago, it was announced that the housing development subsidy will be raised in 2021 and subsequent years. (source:

The subsidy has been around since 1952, yet it is tied to such low income limits that hardly anyone is eligible today to apply for the housing development subsidy. According to calculations done by the LBS state building and loan associations, even the wage of a single-living nurse in her second year on the job exceeds the income limit and fails to qualify for the subsidy. Starting in 2021, the wage limit will be substantially raised, up to 35,000 euros of taxable annual income for singles and 70,000 euros for couples. It would be the first increase in more than two decades.  

Amendment to Apply Even to Existing Building Society Savings Accounts

On top of that, the maximum savings amount eligible for subsidies and the subsidy rate will be adjusted upward as well. From the current rate of 45 euros for singles and 90 euros for married couples, the maximum annual subsidy that the government grants on building society savings schemes will be raised to 70 and 140 euros, respectively, in 2021. The rate is also to be raised for existing building society savings accounts, the Süddeutsche Zeitung daily reported.

However, raising the housing development subsidy rate is unlikely to be understood by the general public as a signal from policymakers that homeownership will now be seriously promoted. Rather, it represents a long overdue update along the lines of an inflation adjustment. The next change that condominium buyers may look forward to is the new regulation governing estate agents’ fees, which has already been passed by the Federal Government but has yet to go through the parliamentary process to be confirmed. In future, condominium buyers are supposed to pay no more than half of the estate agent’s fee. (source:

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