German Pension Reform Report Proposes Higher Retirement Age

A preliminary report on reforming Germany’s pension system, published by DPA, proposes fundamental changes to secure its long-term financing. The commission recommends raising the minimum age for early retirement with reduced benefits from 63 to 64 after 35 years of contributions.

The statutory retirement age is already set to rise to 67 by 2031. Under the new plan, it would then increase by another six months every decade.

The commission also wants to abolish the option of early retirement without reduced benefits after 45 years of contributions.

A key measure would be to invest part of pension contributions in the stock market. Two per cent of gross wages, up from 0.5%, would be directed into equities, with the costs shared between employees and employers. The measure is intended to keep the current contribution rate at 18.6%. Without reform, the rate would rise to 19.9% within two years.

The reform would also affect groups that have so far been exempt. Self-employed people and politicians would be required to contribute to the state pension fund. Current self-employed people, however, would be allowed to opt out. Civil servants’ pensions would be reduced. The commission also recommends cutting the overall number of civil servants.

German labor unions and left-wing politicians have sharply criticized the proposed rise in the retirement age. Employers’ associations have welcomed the commission’s measures but called for a more ambitious reform.

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