Germany’s central bank has recommended that the statutory minimum pension age gradually be increased to 69 to ensure the sustainability of the state pension, while also calling for greater transparency of second and third pillar pension provision.
It made the recommendations as part of an appeal to the German government to run longer-term calculations about how demographic developments will affect the statutory pension system, with official calculations only going up to 2029.
The Bundesbank said that the current positive financial situation of the state pension and projections should not conceal the fact that further adjustments are necessary to safeguard the financial stability of the statutory pension system.
It noted the reforms that have taken place in previous years, including an increase of the state pension age from 65 to 67, and, having run its own projections, recommended raising this further - to 69 years by 2060.
According to the Bundesbank, this would help stabilise the duration of an individual’s retirement relative to the period of contributions, and slow the fall of the state pension level.
It said that longer-term projections will help expose the adjustments that are needed to address the pressure the state pension system will come under as a result of increased life expectancy and the last of the baby-boomer generation retiring by the mid 2030s.
Longer-term government calculations will also reduce beneficiaries’ uncertainty about their financial situation in old age, according to the Bundesbank, which called on the government to provide more transparency about future developments.
It issued a recommendation in a similar vein for second and third pillar pension provision, having noted that the Riester-Rente, a state-subsidised personal pension product introduced in 2002, could compensate for a lower state pension level that would be necessary in the longer-term to secure the sustainability of the statutory system.
However, it said that the state-subsidised private pension needs to be simplified and made more transparent, acknowledging that this is currently under discussion.
Without going into any further detail on this recommendation, it suggested that information about the costs and expected benefits, in particular in relation to the Riester-Rente and occupational pensions, be improved so that beneficiaries have a better view of the potential total pension level they would be entitled to.
The Bundesbank’s comments will feed into an ongoing pension reform debate in Germany.
The German government is trying to steer through major reform involving the introduction of industry-wide pension schemes, the so-called social partner model.
The labour minister, Andrea Nahles, and the finance minister, Wolfgang Schäuble, are reported to have convened a meeting of trade union and employer representatives for this Friday to determine the way forward for such a reform, or to postpone it.
A spokesperson for the labour and social affairs ministry said she could not comment on this, but confirmed that “internal government discussions about the further development and strengthening of workplace pension provision are intensively underway”.
IG Metall, the largest trade union in Germany, has called for the first pillar to be strengthened but has also expressed support for the government’s idea of industry-wide pension plans.