“Pension Package II” is the name of the latest pension madness that was passed by the cabinet at the instigation of the SPD. With this package, the comrades are essentially defeating themselves, with plenty of help from the Greens and FDP.

The “Pension Package II” approved by the cabinet is a success for the Social Democrats. They have ensured that the pension level cannot fall below 48 percent until 2039.

To put it simply: Anyone who has worked for 45 years and earned an average income will receive at least 48 percent of that as a pension in retirement.

What Federal Labour Minister Hubertus Heil (SPD) and his party colleagues are celebrating as a victory for “performance-based justice” is, strictly speaking, a victory for the SPD over itself – and over the effort to achieve a solid pension policy.

In the future, pensions will rise in line with wages. It will suddenly no longer matter that fewer and fewer contributors have to finance more and more retirees.

The SPD had a different view of this demographic imbalance during the red-green coalition under Chancellor Gerhard Schröder. At that time, it wanted to “preserve statutory pension insurance as a reliable pillar of old-age security for the people,” as Labor Minister Ulla Schmidt (SPD) put it.

That is why the “sustainability factor” was adopted in 2003 as a means of stabilising the system. It ensures that changes in the ratio of contributors to pensioners are reflected in the annual pension increases.

In plain language, this means that because there are fewer contributors, the annual increase in pensions has remained below that of wages. This in turn causes the level of pensions to fall.

However, financial solidity is no longer a priority for the SPD. The priority is the financial well-being of pensioners – whatever the cost.

The current 22 million pensioners are the real winners. Their future pension increases will be higher than would be the case under the current regulations. With a view to the upcoming elections, this is not an unimportant side effect.

For the pensioners of tomorrow, the whole thing is a double-edged sword. They will soon have to pay higher contributions. In addition, the state will have to provide even more tax money for pensions. Future pensioners will be asked to pay extra as taxpayers.

It is a strange situation. During the red-green coalition, the federal government tried to push through unpopular but necessary pension reforms. But the Social Democrats and the Greens no longer want to know anything about their policies back then. In fact, they act as if they had never sat at the cabinet table at all.

This turnaround is now taking place with the participation of the Free Democrats, the party that places more value on solid state and pension finances than other parties – at least on paper.

The Social Democrats can be so generous because the FDP was also allowed to include its heart’s desire in the “Pension Package II” – generational capital.

The idea: The state borrows money and invests it in stocks. The profits from this can be used to boost the pension fund a little and to somewhat mitigate the unavoidable increases in contributions.

From 2035 onwards, a sovereign wealth fund with a volume of 200 billion euros is expected to generate annual income of 10 billion euros. However, this is far from enough to offset the costs of the new, supposedly “performance-based” pension formula.

Even if the Bundestag is likely to change one or two of the cabinet’s pension decisions, the SPD has decided to take a backwards step on pension policy – and the FDP is providing support in this.