The German Council of Economic Experts wrote in their yearly report presented at the beginning of the month that the age of retirement must be tied to life expectancy.
Why your children may have to work until 71 in Germany
30 November 2016
Top economic advisers to the German government have estimated that children today will have to work until they are 71 years old for the pension system to properly function.
“This would result in a legal retirement age of 71 until the year 2080, with a life expectancy of 88 years for men and 91 years for women,” the council wrote.
“Therefore in the long-term starting from the year 2030, an increase in the retirement age is necessary so that the contribution rate does not go up too much and the pension level does not go down too much.”
By 2060, the council suggests a retirement age of 69 years old, up from the current age of 65.
When the Federal Bank made the same suggestion in August, it was met with sharp criticism, and Chancellor Angela Merkel’s top spokesman said at the time that the government would not budge from the age of 67, which is already set to become the new retirement age by 2030.
If new generations must work until age 71 by 2080, this would ensure a pension level of 42.1 percent and a contribution rate of 23.9 percent. A higher pension rate of 45 percent would require higher contributions, the experts warned.
But the council’s prognosis also received negative reactions.
“Living conditions, health conditions and personal planning are too varied for this,” said a spokesman from the Federal Ministry of Labour and Social Affairs.
Labour minister Andrea Nahles has argued for a flexible pension system that allows those who want to work longer to do so, but allows those who cannot not to.
“No one needs policy advice that comes from economic theory and economic policy that is no longer in pace with the times,” said Verdi union leader Frank Bsirske.
And Die Welt wrote on Tuesday an analysis of the economic report, pointing out that the council’s prognosis also calls for a lowering of pension levels.
“In the future Germans will have to not only work longer, they will also have to settle for distinctly less,” the newspaper wrote.
But the newspaper also cites experts who say raising the retirement age to 71 is the only way the pension system can function, and the newspaper called the proposal “moderate”.
The Cologne Institute for Economic Research (IW) in May suggested that the retirement age be raised to 71 from 2035 and to 73 from 2041, explaining that the pool of active workers must be expanded to support the large number of pensioners: Germany has one of the oldest populations in the world, and each year since 1972, more people have died than have been born.
Still, Die Welt points out that with a retirement age of 71 by today’s standards, a man currently aged 40 years old is expected to live until 79, meaning he would have eight years of retirement. A woman would have four more years than this.
And given that the average length of retirement currently is 19.6 years, men living until 79 would have about a decade less to enjoy their non-working years, according to Die Welt.