Confusion over German retirement age policy: 67, 63, or 65?

oldman2Germany’s hotly debated retirement age reform of 2007 enforced a rise in the mandatory retirement age from 65 to 67 years over the next decades. It served as a model case across Europe, and initiated a debate about a further rise to 70 years, which seems necessary in light of the expected demographic changes.

Hence, the recent plans of the German government to reduce the retirement age again to 63 have been seen as the completely wrong signal. But this reduction actually applies only to a subgroup of workers with an employment history of 45 years and will be in place only for a small number of age cohorts, namely those born in 1951 and 1952 as older cohorts already passed the age of 63. Starting with the cohort born in 1953, the retirement age will be gradually increased to 65 for cohorts 1964 and younger with long employment histories. So the labeling should be retirement at 65 – still very expensive for the young generation and unfair across generations. Starting in 2030 the measure will cost 3 billion euros per year, which is even higher than the expected yearly amount of 2 billion up to year 2029.

At the last minute, the coalition decided to include an attempt for a more flexible entry into retirement into the entire reform (including also the most expensive measure of the mother’s pension, and two measures affecting individuals with medical issues). However, details about this so-called “Flexi-Rente” are not clear yet and are supposed to be worked out by a working group until fall 2014.

As the reform is still in the political process, marginal changes can of course still occur until the law is finally passed.

IZA Director Klaus F. Zimmermann wrote about this issue in the Financial Times:
“Germany’s hypocrisy on pensions will cost money and friends”

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