Although the statutory retirement age is gradually being raised to 67 and is currently 65 years and eleven months, the average age of the first recipients of an old-age pension in 2021 was 64.1 years – and thus slightly younger than in the two previous years.
This is also due to the so-called “pension from 63”, which allowed everyone born before 1953 with at least 45 years of contributions to retire from this age without deductions. Since then, this age limit has also been gradually raised.
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Insured accept deductions on pension
When it was introduced in 2014, the government had forecast around 200,000 applicants for the pension without deductions for the particularly long-term insured. In fact, according to the German Pension Insurance Association (DRV), there were around 257,000 last year. A year earlier, the number was slightly higher, at 260,000 applications.
Employer President Rainer Dulger criticizes that many highly qualified workers are no longer available to companies because of the pension from 63. But people only “perceive the opportunities that they have by law,” said DRV President Gundula Roßbach of the German Press Agency.
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However, many employees also retire prematurely if they have to accept deductions from their retirement benefits. Almost every fourth old-age pension that was paid for the first time last year was associated with cuts that amounted to just under 110 euros gross per month on average.
For every month that employees leave before the regular retirement age, the monthly pension is reduced by 0.3 percent. So if you leave one year earlier, you have to accept a 3.6 percent discount, with two years it is 7.2 percent.
The German Economic Institute (IW) has now calculated that the deductions are still too low and that early retirement is at the expense of the pension fund. In the study, which is available to the Handelsblatt, economist Jochen Pimpertz compares how much money a retiree would theoretically receive until death with early and regular retirement. In doing so, he takes into account the different life expectancies of men and women.
Result: If the pension fund is not to be additionally burdened by early retirement, the deduction for men who retire one year before the regular retirement age should actually be 4.6 percent – and thus one percentage point higher than under current law. If retirement is three years early, the deduction would have to be increased by 1.6 percentage points.
Early retirees become a burden for contributors
In the case of women, with their longer retirement periods, the differences between the applicable and the “fair” deduction are not quite as large. In the event of an early exit by three years, the statutory deduction could even be slightly smaller than under current law.
Even with a “budget-neutral” deduction, the contributors are threatened with permanent burdens because more pensioners would have to be supported by fewer contributors due to early retirement, Pimpertz points out. This can affect the posts.
The IW economist is therefore skeptical that the traffic light coalition has even increased the incentive for early retirement. Because from 2023, employees who retire prematurely will be able to earn an unlimited amount of money in addition to their old-age pension. Deductions and lower entitlements can thus be more than compensated for.
In the corona crisis, the federal government initially raised the additional earnings limits in order to provide work incentives in view of the widespread shortage of staff. Now they fall entirely.
If even more employees decide to take early retirement and earn something on the side, the pressure on the contributors, who have to “finance” early retirement, increases. Pimpertz therefore advises the government to evaluate the new regulation promptly so that the hoped-for weakening of the shortage of skilled workers is not at the expense of the contributors.
People over 60 work longer than they used to
However, early retirement is only one side of the coin. People who are about to retire are much more involved in working life today than in previous years. The employment rate for 60 to 64 year olds was recently a good 61 percent and thus three times as high as at the turn of the millennium.
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And even if retirement at 67 does not apply until 2031, many employees are already working longer. As can be seen from the response of the federal government to a request from the left-wing faction, at the end of March almost 1.1 million dependent employees were 67 years of age or older – 200,000 more than in 2015. A good three out of four had a mini-job.
If Employer President Dulger or the economist Martin Werding have their way, working beyond the age of 67 should become the norm in the more distant future. In view of the demographic change, one should not give the impression that retirement at 67 could be permanent, Werding told the “Bild” newspaper.
The Bochum economist, who once also headed the welfare state commission of the Confederation of German Employers’ Associations (BDA), has long advocated linking the retirement age to increasing life expectancy. According to the current statistical data, an entry age of 69 years would then be reached in around 2055. However, the traffic light coalition does not want to deal with a further increase in the retirement age during this legislative period.
More: Reader Debate – Should Everyone Work Longer to Combat Skills Shortages?