Giving money to children: Germany's surprising idea to save its pensions

Pension reform isn't just fueling public debate in France. The equation is roughly the same in Germany. It's a pay-as-you-go pension system that's accumulating deficits because there are no longer enough active contributors to pay for the retirement of an ever-increasing number of senior citizens.

And on both sides of the Rhine, everyone refuses to lower pensions. The idea that is beginning to gain consensus in Germany would then be to introduce an additional level to the pay-as-you-go system in the form of capitalization. Marylise Léon , the head of the CFDT, says she is open to this idea, she reiterated this on Wednesday in an interview with Le Figaro .

Generally, this kind of proposal runs into a stumbling block. Employees cannot be asked to contribute twice, first to fund current retirees (distribution) and then to fund their own retirement tomorrow.

And this is where the German government's proposal is original. It proposes to pay 10 euros per month to each child from the age of 6 until they turn 18.

This sum would be paid by the State into an individual retirement account. However, the management of the accounts would be a private matter so that everyone could make the money invested grow.

Based on a 6% annual return, a young person would end up with €2,100 at the age of 18. Once they reach the age of majority, they can continue to pay in €10 per month until retirement, if they wish, in which case they could claim an allowance of €70,000 in addition to their public pay-as-you-go pension. If they stop paying in at 18, and this money, the €2,100, grows throughout their career, they could receive €36,000.

Friedrich Merz explained that this system would still cost less than the ever-increasing federal subsidies paid to the pension insurance system. These cost the German state nearly 90 billion euros a year. It remains to be seen whether the conservatives and social democrats will be able to agree on the exact terms of this system. If so, it could come into effect as early as next year.