The social insurance program was established in 1889 and provides retirement pay. Although the central government has always formulated social insurance policy, the implementation of the program is decentralized. In unified Germany, control over the blue-collar insurance programs remains in the hands of twenty-three Land -based insurance agencies and four federal insurance agencies. In the old Lšnder in western Germany, eighteen Land -based insurance agencies serve people in geographical districts that conform to those established in the nineteenth century, not to the geographical entities created after 1945. With the assistance of staff from the West German insurance agencies, five Land -based and self-governing insurance agencies were established in the new Lšnder .
Four federal insurance agencies serve four groups in unified Germany: federal railroad workers, merchant marine seamen, miners, and white-collar workers. Civil servants and their dependents are covered by a separate retirement program financed by outlays from federal, Land , and local governments. Other retirement programs provide retirement income for registered craftsmen, agricultural workers, and self-employed professionals.
Because of population trends that indicate a worsening worker/retiree ratio and the likelihood of solvency problems in the next century, the pension reform of 1992 increased the usual retirement age from sixty-three to sixty-five, beginning in 2001. Whatever the legal retirement age, many Germans retire early for health reasons on disability pensions.
The amount of retirement pay is determined by the length and level of the insured person's contributions. Contributions in 1995 were scheduled to amount to 18.6 percent of an employee's annual gross income up to a maximum of DM93,600 in the old Lšnder and DM76,800 in the new Lšnder , with the employee and employer each paying half. In the early 1990s, the average retirement pension amounted to about DM1,600 per month for retired persons over the age of sixty. This meant that Germany had the fourth-highest pensions in Europe, surpassed only by Luxemburg, France, and Denmark. In 1957 legislation was passed that required pensions to be indexed, that is, raised according to average wage increases.
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