The Bundesbank is not giving up. As early as three years ago, when Germany was still in an economically untroubled age, the monetary watchdogs pushed for reform of statutory old-age provision. In the long term, she warns, the retirement age must rise to more than 69, otherwise the system will become unaffordable in the foreseeable future. The public echo followed promptly: an outcry of indignation echoed through the country.
Now the monetary watchdogs have tried again to put their concerns on the agenda. The reaction this time? silence and shrug. Doesn’t Germany have completely different concerns in view of the war in Ukraine? An energy shortage is approaching, prices are rising at an alarming rate, global supply chains are faltering, and Europe’s stability is in jeopardy. FDP finance minister Christian Lindner is already warning of an “economic crisis that is to be taken very seriously.” The shortage will last “maybe five years”.
The situation is precarious. And that is precisely why the figures from the Bundesbank are so disturbing, especially when you consider that around 100 billion euros in tax revenue are already flowing into the pension fund. If the planned course of the traffic light coalition, to stabilize the pension level permanently at 48 percent, then the pension contribution rate will rise threateningly, from the current 18.6 to around 24.5 percent in 2040. By 2070 it will even swell to 29 percent, what would impose a crushing burden on millions of younger contributors. An economic crisis scenario has not even been taken into account.
Even today, hardly anything can be enforced against pensioners and soon-to-be retirees
The Bundesbank refers to the demographic trend that is actually well known: the baby boomers will retire by mid-2030, and life expectancy is likely to continue to rise. Fewer and fewer contributors then have to pay for more and more retirees. Both put massive financial pressure on the pension fund. That is why the currency watchdogs are promoting linking the retirement age to life expectancy in order to stabilize the pension fund in the long term.
In concrete terms, this means that if life expectancy continues to rise after 2031, the retirement age would have to be raised from 67 to around 69 by 2070. But if not – and critics of the proposal like to ignore this – then the retirement age would not be raised that much. So it’s not about retiring at 69 at any price, but about a sensible solution that relies on a constant relationship between the period of employment and the period in which you receive a pension: two-thirds work, one-third draw a pension. Of course, it should be borne in mind that a lower age limit is required for employees with physically or mentally demanding jobs.
It is obvious why the monetary watchdogs would like to see the regulation anchored in law as soon as possible. The voters are getting older, and even today there is hardly anything that can be done politically against pensioners and people who feel close to retirement. In the 2021 federal election, almost 58 percent of those eligible to vote were 50 years or older. No politician likes to mess with them. The latest example of this is Stephan Weil, Lower Saxony’s prime minister, who has to stand elections as the next state head of government and fears a bitter defeat for his SPD, as recently happened in North Rhine-Westphalia. Weil is fighting to ensure that retirees also get energy money from the state like millions of employees. The FDP is still holding on. Only her head of state in Lower Saxony, Stefan Birkner, is very nervous. He wants semi-annual pension adjustments instead of the usual annual ones.
The question is: Would a politician like Franz Müntefering once dare to raise the retirement age in the face of massive resistance? If the Social Democrat Müntefering hadn’t ensured in 2008 that the retirement age had risen to 67 by 2031, the pension system would be in a much worse position today. But if politicians don’t regulate such questions wisely in good time, then a crisis will bring about the solution abruptly.