Imagine working until at least the age of 69 - that’s what the experts at the Bundesbank in Germany are recommending. They argue that such a change is necessary; otherwise pension payments will fall too low in the face of rising life expectancies. 

Demographic change puts pressure on German pension system

Discussing the prospect of a future reform of the pension system in Germany, the Bundesbank has proposed a long-term increase in the retirement age to 69 years and four months by 2070. This is to prevent the so-called “pension level” (Rentenniveau - the ratio between the standard pension benefit and the average salary) from falling too low in the future. 

The Bundesbank justified its proposal by pointing to the expected increase in life expectancy in Germany. “Due to demographic development, pay-as-you-go statutory pension insurance will come under considerable pressure in the future, especially from the mid-2020s,” the bank notes in its monthly report for October.

Baby boomers to retire in 2020s

Since 2012, the minimum age limit for receiving the statutory pension in Germany has gradually been raised from 65. It is due to reach 67 by 2031. However, according to the experts, this does not go far enough, because from the mid-2020s the so-called “baby boomers” will reach retirement age. 

In order to keep the system stable, there is a “need for adjustment in the central parameters of pension insurance,” writes the Bundesbank. An important starting point for this would be to raise the retirement age. This is in line with recommendations printed by organisations such as the European Commision, the IMF and the OECD, who have all suggested raising the retirement age in line with increasing life expectancy. 

According to the Bundesbank’s proposal, anyone born in 2001 or later would retire at the age of 69 and four months. Such an adjustment would not only relieve pressure on Germany’s pension fund, the bank argues, but would also increase macroeconomic potential through higher employment and thus support the tax base and social security contributions. 

Parties on the left against higher retirement age

While the proposal was met with support from some quarters, representatives from the SPD, Greens and the Left were quick to express their scepticism. “I think a higher retirement age is wrong,” said Katja Mast, leader of the SPD regional group in Baden-Württemberg. 

Left-wing parliamentary leader Dietmar Barsch demanded that the government broaden the contribution base for the pension fund: “Instead of demanding a higher retirement age, the income of the pension fund must be increased, in order to allow the pensions system a secure and long-term future.”