No relief in electricity taxes for all households
In a significant development, the coalition committee of Germany's new government alliance has reaffirmed its decisions on key issues, including the extension of the cap line for the pension level, the implementation of an expanded maternal pension, and electricity relief measures.
The extended cap line for the pension level, a priority for the Social Democratic Party (SPD), is set to continue until 2031. This move aims to provide stability and security to the pension system.
In a boost for mothers, the expanded maternal pension, a project demanded by the Christian Social Union (CSU), will commence as early as January 1, 2027. This decision extends child-rearing time in the statutory pension insurance for children born before 1992 by an additional six months, up to three years. The expanded maternal pension will be financed from tax funds.
Federal Minister of Labor and SPD Chairwoman Barbara Bas has budgeted additional expenses of initially 4.1 billion euros for her first pension law from 2029. The expanded maternal pension is expected to positively impact pension amounts by including maternity periods as credited service, thereby increasing the pension entitlement.
The coalition committee, considered the central planning committee of the new government alliance, meets at least once a month to coordinate matters of fundamental importance between the coalition partners and bring consensus in cases of conflict. The committee's latest meeting was held on a significant agenda, with discussions centring around contentious issues.
Regarding electricity relief, the coalition committee has confirmed the components of the relief, which amounts to up to 3 cents per kilowatt-hour (kWh) for all consumers, translating to a relief of up to 100 euros per year for a family of four. However, the decision not to reduce the electricity tax for all businesses and consumers has sparked broad criticism.
The coalition partners have announced their intention to permanently relieve companies and consumers in Germany by at least five cents per kWh with a package of measures, as outlined in the coalition agreement. Yet, the key question remains how a reduction in the electricity tax for all businesses and consumers can be financed, requiring cuts in other areas.
The existing cabinet decision brings relief of around 10 billion euros for consumers and the economy annually, according to the Union and SPD. The electricity tax reduction for industry, agriculture, and forestry is to be "stabilized", but not for all businesses and private households.
Chancellery Chief Thorsten Frei was not present at the coalition committee meeting this time, instead participating in the Sparkassen-Forum in Donaueschingen in his constituency in the Black Forest.
Federal Chancellor Friedrich Merz had promised a solution before the meeting, but no solution has been announced yet. The coalition committee meeting is scheduled for Wednesday to discuss these contentious issues further.
[1] Expanded Maternal Pension: Typically refers to pension benefits that account for time spent by women on maternity leave, recognizing this period as contributory service for pension calculations. This can affect pension amounts positively by including maternity periods as credited service, thereby increasing the pension entitlement.
[2] Timeline: Implementation timelines vary by country or organization and depend on legislative or policy changes. For instance, such expansions might be phased in starting from a particular fiscal year or after certain legal reforms.
[3] Financing: The financing of expanded maternal pension benefits usually comes from pension fund contributions, which may be adjusted to account for additional credited service periods, or from government subsidies if the pension plan is publicly funded.
[4] Impact on Pension Package: The main impact is that mothers receive higher pension benefits or do not face pension reductions due to career breaks for childbirth and childcare. This promotes pension equity and supports gender equality in retirement benefits.
- The expanded maternal pension, initially financed from tax funds, will have a positive impact on pension amounts, as maternity periods will be included as credited service, thereby increasing the pension entitlement in the general-news industry.
- In the realm of politics, the coalition committee has confirmed the extension of the cap line for the pension level in the finance sector until 2031, which aims to provide stability and security to the pension system, and the implementation of electricity relief measures for consumers.
- The energy sector could witness changes in the future, as the coalition partners have announced their intention to permanently relieve companies and consumers by at least five cents per kilowatt-hour, but the key question remains how this reduction in electricity tax can be financed, requiring cuts in other areas.
