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Should Germany revamp its 'unaffordable' early retirement scheme?

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DPA/The Local - [email protected]
Should Germany revamp its 'unaffordable' early retirement scheme?
Baden-Württemberg state premier Winfried Kretschmann (Greens). Photo: picture alliance/dpa | Bernd Weißbrod

Baden-Württemberg's state premier Winfried Kretschmann says Germany "can't afford" a scheme that allows sections of the workforce in Germany to retire early.

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As people live longer and labour shortages intensify, Kretschmann noted that fewer workers than before performed physical labour and suggested that the retirement age should be adjusted according to people's jobs. 

"We can't afford to have mostly healthy individuals who earn well retiring at 63."

The 'Pension at 63' scheme he referred to has in fact become something of a misnomer. It refers to a retirement option that initially allowed for pension payments without deductions after 45 years of contributions for people born in 1953 or earlier. But the limits have since been revised upwards. Last year, the early retirement age under the scheme was 64. Starting with the birth year 1964, the penalty-free retirement option is available at 65 at the earliest.

Kretschmann disputed the notion that early retirees were mainly manual labourers or people with mentally demanding jobs. In seeking a tougher line, he referred to the scientific advisory council of the Federal Ministry of Economic Affairs, which suggests that a majority of those who retire early are well-educated, earn above-average incomes, and are in good health.

READ ALSO: How does Germany’s retirement age compare to the rest of Europe?

The Green Party politician also pointed out that people were living longer and remaining healthy for more extended periods. He believed that this should be reflected in the retirement system, as otherwise the federal budget would have to allocate more for pensions, which also raised issues of generational fairness.

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Baden-Württemberg's Finance Minister Danyal Bayaz, a party colleague of Kretchmann's, has also previously characterised the scheme as a serious mistake. He argued that it was not only unfair across generations and inappropriate in light of the labour shortage, but also sent a disastrous message that needed correction.

He advocated for a more thoughtful approach to retirement in the face of increasing life expectancies. One possible model he suggested was to allocate four months of additional work and eight months of additional retirement to each additional year of life expectancy.

Bayaz also questioned the sustainability of a regular retirement age of 67, as Germany plans to introduce by 2031. He believed that current generations must prepare to work longer if they want to maintain their standard of living. 

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Lyssa in Mainz 2023/09/18 09:45
I will take my first private pension at 55 ($4000/mo), my second private pension at 60 ($2000 more/mo), and my full government pensions ($3500 more/mo) at 67.. So glad my country allowed for private pensions so I don't have to work well into my golden years just to get by. When I heard how little seniors in Europe are living off of, it made me sad.

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