GERMANY - German parliament today approved a government proposal to raise the retirement age from 65 to 67.

The measure was adopted by the lower house where the governing grand coalition of conservative CDU/CSU and the social democrat SDP has a comfortable majority.

It has been opposed by trade unions and opposition parties.

Under the new law all people born after 1964 will have to work until the age of 67. A phased increase will be introduced for people born between 1947 and 1963 starting from 2012 with the target age being reached by 2029.

An exception will be made for people who work for 45 years, who will still be able to retire at 65.

The government hopes the new law will keep the level of monthly pension contributions to less than 20% of a gross salary, up slightly on the current 19.5%.

An agreement between the coalition parties on first pillar pension provision reform reached last October also laid out plans to increase the rate to 20% from 2020 and to 22% from 2030. These plans appear to have been set aside for now.

However, economics minister Michael Glos told the German news magazine Der Spiegel that a further increase of the retirement age or the contribution rate might be necessary over the coming years.

Trade unions called the measure counterproductive in that some 1.2m Germans aged over 50 are currently jobless. Union members have threatened to stage strikes over the next months.