Germany to scrap “Rente mit 63” early retirement policy

Chancellor Friedrich Merz (CDU) has said his coalition government is committed to scrapping Germany’s early retirement policy known as “Rente mit 63” (“retirement at 63”).

Germany likely to scrap “Rente mit 63”

Returning from summer recess, Germany’s CDU/CSU-SPD coalition government met this week for a cabinet retreat in Neuhardenberg, Brandenburg. At the retreat's close, Merz announced that his government would proceed with plans to scrap Germany’s “Rente mit 63” policy.

Merz’s confirmation comes after a government-appointed 13-person expert commission published a 33-point plan to reform the pension system shortly before parliament broke for summer recess in early July.

“We agree that we must put an end to all incentives for early retirement,” Merz told the Neuhardenberg press conference alongside Finance Minister Lars Klingbeil (SPD) and Interior Minister Alexander Dobrindt (CSU). “That is how it must remain; it is a key element of the reform”.

Other elements of the broader reform - which Merz previously called “a complete concept that only works as a whole” - include tying the retirement age to life expectancy, investing pensions in capital markets and obliging freelancers to pay into the statutory pension system, rather than private systems.

What is the “Rente mit 63”?

Currently, the standard retirement age in Germany is 66 years and six months and applies to people born in 1959. This will rise to 67 by 2031 and will apply to anyone born in 1964.

Then there is the “Rente mit 63”, the confusingly named policy on the chopping block. Its official name is the “old-age pension for those with a particularly long insurance record”; this better describes what it does.

“Rente mit 63” allows people to claim their pension without any deductions before reaching the standard retirement age so long as they have contributed to the state pension system for at least 45 years.

This used to be possible from age 63, but now it is only possible from age 64 years and six months, and is slowly increasing to 65. This is because the general retirement age has been raised, so the minimum age to claim the “Rente mit 63” has also increased.

According to the German Federal Pension Fund (Deutsche Rentenversicherung), 40 percent of employees retire at the standard retirement age in Germany, around 25 percent retire later, and around 30 percent retire early after making 45 years of contributions.

Even more confusing, the “Rente mit 63” policy is separate from Germany’s general early retirement policy, which offers people who have made at least 35 years of pension contributions the option to retire early. But in this case, the number of months claimants have left until they reach retirement age is deducted from their state pension entitlement.

What happens now?

Merz has said he wants to implement the pension reform before the end of the year, but several steps remain before anything can become law.

The government will need to draft a pension reform law, which will likely be hotly debated before facing a vote in parliament.