Up to what age should people work? And are they allowed to retire earlier after a long life of work and still receive their full pension? These questions are among the most controversial in German social policy. The challenge of how to finance the living expenses of the more than 21 million pensioners is becoming ever greater. The number of pensioners is increasing faster than the number of employees, who finance their living with their social contributions and taxes; employees have to finance more and more retirees.
Politicians from the ranks of the traffic light parties and the Union as well as experts are therefore calling for the retirement age to be raised further. The legal age limit is currently just over 66, and will rise to 67 by 2031. There is also discussion about abolishing the “pension at 63”, which allows insured people to retire without deductions after 45 years of contributions. Baden-Württemberg’s Prime Minister Winfried Kretschmann (Greens) criticized the regulation at the end of December. “The majority of those who retire earlier are healthy, earn well – and are actually productive,” he said. The First Parliamentary Managing Director of the FDP parliamentary group, Johannes Vogel, had previously demanded that retirement at 63 “should not be a taboo”. The age limit for this regulation will also increase by 2031 and is currently 64 years.
Older people go to work much more often than before
Now the response from the Federal Ministry of Social Affairs to a parliamentary question from the Left in the Bundestag is giving new fuel to the debate. Accordingly, the number of people working at the end of their working life or at the beginning of retirement has increased significantly in recent years. According to the Federal Ministry of Social Affairs, the number of people subject to social security contributions and those in part-time employment aged 63 to 66 inclusive increased from 1.32 million in 2020 to 1.67 million last year. That’s an increase of 26.2 percent within just a few years. Germany’s older people go to work significantly more often than just a few years ago.
It is not yet possible to say clearly what caused this development. Several factors are conceivable that have played a role in recent years. The statutory retirement age has continued to rise by one month per year. However, this was also the case in previous years. In addition, retirees have better opportunities to earn extra money without this being counted towards their pension payments. Anyone who earned more than 6,300 euros per year in 2019 had their pension reduced. In the wake of the corona pandemic, lawmakers raised this limit to 44,590 euros, but at the beginning of last year it was eliminated completely. Since then, retirees have been able to work without this being counted towards their pension. Another influence could be that seniors are healthier, that they feel like working longer – or that their pension is so small that they have to earn something extra to maintain their standard of living or to be able to pay their rent.
Matthias Birkwald argues in this direction. The Left’s pension expert in the Bundestag made the request to the federal government. Older people should not be forced to continue working because of their low pensions, he explains. However, the reality is different for many people; almost every second person over 65 only has an “extremely modest net income of less than 1,250 euros,” writes Birkwald, referring to data from the Federal Statistical Office.
Labor Minister Heil rejects a pension at 70
Birkwald sees the figures on the increasing employment of older people as evidence that people should continue to be able to retire early without deductions and that the statutory retirement age should not be increased any further. “You constantly hear calls about raising the standard retirement age, abolishing the ‘pension from 63’, even though it hasn’t existed for a long time, or a so-called flexible retirement,” says Birkwald. What is often ignored is the fact that you can significantly improve your future pension by working longer without drawing a pension. Employers are obliged to offer their employees good work so that they voluntarily work longer.
Federal Labor Minister Hubertus Heil (SPD) also vehemently defends the pension at 63, which is now a pension at 64. “Anyone who has worked for 45 years has the right to retire earlier without any deductions. With me, there will be no pension at 70, as many conservatives want,” said Heil in January. The Federal Minister of Labor is relying on voluntary work so that employees work longer. Heil’s predecessor in the Labor Ministry, Andrea Nahles (SPD), pushed through the “pension at 63” in the then grand coalition in 2014.
It is now clear that the regulation is seriously exacerbating the shortage of skilled workers. Every year, hundreds of thousands more employees leave the workforce than younger ones come in. Every year, more than 200,000 people take early retirement via the “retirement at 63” option. According to the latest pension insurance report, the number has not decreased in recent years; in 2022, 256,000 people entered into retirement without deductions, previously there were 262,000 (2021) and 259,000 (2020).
The declared aim was to enable people in occupations that were particularly stressful for their health to leave the job earlier; roofing was often mentioned as an example. However, data from the German Pension Insurance and the Socio-Economic Panel show: Employees who took advantage of the pension at 63 are much less likely (7.5 percent) to say that their health is “less good” or “bad” than those who did who do not receive a tax-free pension (19.4 percent).
According to pension researcher Axel Börsch-Supan, middle-income people in particular benefit from early retirement after 45 years of insurance. According to Börsch-Supan, there are “a particularly large number of well-trained and therefore well-earning skilled workers.”
Despite the new figures, the FDP sees a need for further changes to the “pension at 63”. Although the development is going in the right direction, “it is still too small to be a major success against the shortage of skilled workers and workers,” said Pascal Kober, the labor market and social policy spokesman for the FDP parliamentary group, to the SZ. Germany is still losing too many workers and skilled workers on the labor market too early. Well-educated and well-earning skilled workers in particular would make use of the “pension at 63,” says Kober, people “whom we so urgently need on the job market.” Therefore, a reform of the regulation is still necessary.