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OECD’s 7-point plan for German pensions

GERMANY – The Organisation for Economic Cooperation and Development has put forward a seven-point plan to continue the reform of Germany’s pension system.

The ideas include a phased increase in the statutory retirement, making the system actuarially neutral and an evaluation of tax subsidies in the funded system.

And it says that public sector pensions should be fully harmonised with the general scheme – with a transparent link between contributions and benefits established.

Other proposals include the possible abolition of the special tenure for civil servants (Beamte) and putting civil servants’ healthcare insurance under the same rules as private sector employees. And it called for higher contributions to pre-fund retirement outlays.

“Parameters of important ageing-related spending programmes are not sufficiently adjusted to predictable demographic changes and make future contribution changes likely,” the OECD said in its 2005 economic survey of Germany.

“Special tenure and pension schemes for civil servants reduce labour mobility and make it more costly to reduce public sector employment.”

It added: “Progress in pension reform should continue by announcing soon a phased increase of the statutory retirement age. Fiscal subsidisation of the funded system should be reconsidered.”

The organisation added that “participation in the voluntary funded scheme is hampered by cumbersome regulations, while it is relatively expensive in terms of evolving tax expenditures”.

“To create confidence and to restore Germany’s traditional economic strength it is necessary that reforms reflect a coherent vision about the reorientation of economic policy – combining a growth and stability oriented macro-economic policy with structural reforms – and are implemented according to a transparent and predictable roadmap,” the OECD said in summary.

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