Pensioners benefit despite high inflation - why they got through the crisis better

Pensioners benefit despite high inflation - why they got through the crisis better

The past few years have been marked by economic challenges such as the corona pandemic, short-time work and an energy crisis, which have led to massive increases in prices. The high inflation rate in particular has placed a heavy burden on citizens. In 2021, the inflation rate rose above the 3 percent mark for the first time since 1993, reaching an annual average of 3.1 percent. During the Russian war of aggression against Ukraine it even reached 6.9 percent. Consumer prices remained stubborn in 2023, increasing by 5.9 percent compared to the previous year.

Retirees, who typically have less room for maneuver than young workers, are particularly affected when inflation spirals out of control. However, a study by the German Economic Institute in Cologne shows surprising results: despite limited opportunities to compensate for inflation-related losses in purchasing power, pensioners on average did not suffer more than other households. In some cases they even got through the crisis better.

Comparing the effects of inflation on pensioner households with other households suggests that pensioners have optimally adjusted their consumption patterns. In years when high inflation rates were driven by energy, transport and food prices, pensioner households were able to offset the burden relatively well. However, food prices rose dramatically in 2023, putting more strain on retirees than other households.

Despite some challenges, pensioner households overall got through the crisis years better than other households. The average loss of purchasing power for pensioners between 2018 and 2023 was around 1.7 percent, while other households suffered losses of 2.2 percent. This is mainly because statutory pensions do not fall even when wages fall, which protects pensioners from major losses.

Changes to housing benefit, particularly the benefit expansion in 2023, have helped pensioners benefit from the relief. Nevertheless, it should be noted that pensioners have, on average, lower incomes than other households, which makes them particularly vulnerable to losses in purchasing power. In the future, targeted measures should be taken to better support households with low incomes, regardless of whether they come from statutory pensions or from employment. A decline in inflation will ease the pressure for now, but the future requires tailored support measures for low-income households.