German chancellor Olaf Scholz wants to create conditions for people to work longer, a move that has triggered an intense debate in the country on early retirement, potentially leading to changing current rules on pensions.
“It is important to increase the share of those who can really work until retirement age. That is difficult for many today,” the Chancellor said in an interview with German Funke Mediengruppe and the French newspaper Ouest-France.
The comment on retirement age by Scholz follows recently published figures by the Federal Institute for Population Research – Bundesinstitut für Bevölkerungsforschung (BiB) – showing that many people of the so-called baby boomer generation are currently leaving the labour market at the age of 63 or 64, well before the statutory retirement age; that has been increasing gradually since 2012 from 65 years to 67 years old.
Baby boomer employees are deciding to withdraw their pensions earlier taking advantage of a rule passed in 2014 by the grand coalition of Social Democrats (SPD), Schulz’s party, and the Union, the alliance of Christian Democratic Union (CDU) and the Christian Social Union (CSU), the BiB said.
“Rente mit 63” (pension at 63) as the rule was dubbed, allows employees insured for a long period of time to retire at the age of 63 without pension cuts, but proving that they have been paying contributions for 45 years.
Figures from the Deutsche Rentenversicherung, which manages the state pension scheme, show that in recent years more people are retiring before the statutory retirement age, accepting reductions in the amount of their pension, according to reports.
The early exit of baby boomers from the labour market has a particularly strong impact on labour supply in the German economy, with a lack of experienced and qualified workers, BiB added.
Scholz sees “potential for increase” in the share of women in the labour market, but only by bolstering whole-day offers in crèches, Kindergartens and schools, he said.
Germany can also create better opportunities for young people starting their careers and investing in vocational training and further education, said Scholz, adding that the country needs immigration for growth.
Will the ‘pension at 63’ rule change?
The liberal party FDP, the Social Democrats’ coalition partner, welcomes the chancellor’s comments, with Christian Dürr, head of the FDP parliamentary group, telling the Tagesspiegel newspaper that Olaf Scholz’s considerations on early retirement are going in the right direction. “We have to give people more individual options for their retirement.”
A flexible retirement age would give individuals options for a transition to retirement and in turn making the possibility to work longer more attractive, he added.
Marc Biadacz, the MP for the CDU, agrees that retirement age should be flexible, adding that for example for a line worker is difficult to do heavy physical work in old age, however it must be clear that “those who can work longer will also have to work longer.”
The MP for the SPD and chair of the committee for labour and social affairs, Martin Rosemann, added to the discussion: “There are no longer any legal hurdles to work longer on a voluntary basis.” The government coalition will seek to discuss with employers and trade unions, meanwhile preparing an action plan on health in workplaces, he said.