Could the retirement age in Germany soon be raised to 68 or even 70?
Two separate expert reports have this week suggested that Germany is heading towards financing issues if it doesn’t raise its retirement age soon. The suggestion has, unsurprisingly, proved controversial. But will the government act on the findings?
Reports call for retirement age to be increased in Germany
This week, a report issued by the Federal Ministry of Economics’ advisory council warned that Germany is facing “shocking increases in financing issues for the statutory pension system from 2025 onwards”, as it struggles to grapple with its ageing population.
The council concluded that the only solution would be to raise the retirement age in Germany to 68 by 2042 - a proposal that’s likely to go down like a lead balloon among voters. Indeed, the suggestion was instantly met with fierce criticism from the SPD, Left and Green parties.
But they’re not the only ones sounding the alarm. Researchers at the German Economic Institute (IW) have gone even further - calling for the retirement age to be raised to 70 by 2052, arguing that an increase to 68 years would not be sufficient to stabilise the pension contribution rate below 22 percent.
Retirement age has been going up since 2012
The idea is not a new one. In fact, the age of retirement in Germany has been increasing incrementally since 2012, following a government reform. It is currently being raised by a month each year and, from 2024, will go up by two months each year until it hits 67. That means that people born in 1964 will have to wait until their 67th birthday before they can finish working.
But the problem is that people in Germany are simultaneously living longer and having fewer children, causing the demographic makeup of society to change drastically. While the working-age population currently outnumbers pensioners three to one, by 2060 this is expected to fall to three to two, effectively meaning there will be fewer workers paying into social security to fund the pension benefits of the older generation.
Should this trend continue, the advisory council is predicting that by 2040 as much as half of the federal budget would have to be spent on pension pay-outs. The proportion is currently 28 percent. To put it bluntly, in the words of economist Bernd Raffelhüschen, “The pension system is on the verge of ruin.”
Political parties distance themselves from report
But raising the retirement age is never going to be a vote-winning policy, and since 2021 is the year of the federal election, politicians have been anxious to quickly distance themselves from the idea. The CDU / CSU’s coalition partners, the SPD, have outright rejected the report and accused the commission of getting its figures wrong.
Pointing out the fact that one in five people in Germany do not live to see their 69th birthday, the Left party described the report as an “anti-social act of cheek” and pledged to “defend the rights of pensioners tooth and nail.” The party’s social affairs expert Sabine Zimmerman said, “The numbers speak for themselves: the higher the retirement age, the fewer people who will be able to enjoy their pensions.”
The Federal Employers’ Association, on the other hand, praised the report, saying that “this conversation needs to be had, and it needs to be had honestly.”