As of: February 15, 2024, 11:16 a.m
By: Ulrike Hagen
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The German pension system is under pressure, and pensions at 63 are the subject of heated debate.
The economist Martin Werding calls for radical reform.
Bochum – In Germany, retirement at 63 is becoming increasingly controversial, especially given the shortage of skilled workers and the strain on the pension system.
Among the various proposals and demands for reforming the pension system, the discussion about the so-called pension at 63 is increasingly coming into focus.
Now, in an interview with IPPEN.MEDIA, economist Professor Martin Werding is calling for “Abolish the pension at 63!” – and is calling for drastic restrictions.
The German pension system is under pressure, and pensions at 63 are the subject of heated debate.
The economist Martin Werding calls for radical reform.
(Symbolic image) © Imago/Michael Gstettenbauer
Economist calls for retirement at 63: “Eliminate false incentives”
The opposition CDU has already repeatedly called for the pension at 63 to be abolished; instead, female employees should have to work four months longer for every year their life expectancy increases.
The economist Martin Werding is now also calling for a reform: “I and the Economic Advisory Council, of which I am a member, suggest eliminating false incentives for employees to leave working life early,” said Werding in an interview with IPPEN. MEDIA.
Those receiving early pensions without deductions are “generally in above-average health and are urgently needed as skilled workers”.
Here we need to create more “negotiation scope for employers to retain these employees”.
In other words: If you leave early, your pensions should be adjusted to the longer term with deductions, like for all other employees.
The deductions, i.e. deductions from the full pension in the event of early retirement, are generally too low in Germany.
What is the pension at 63?
The discount-free old-age pension for those who have been insured for a particularly long time – from 45 years of insurance – is colloquially called “pension at 63”, but this term is misleading.
The start of the pension depends not only on the insurance period, but also on the year of birth.
Due to the gradual increase in the standard retirement age from 65 to 67, the entry age for early retirement is also increasing.
An example: Anyone born on July 1, 1959 can receive this pension on September 1, 2023 at the age of 64 years and two months.
The entry age gradually shifts upwards depending on the year of birth because the retirement age is gradually increased.
If you were born in 1964 or later, you can only retire without deductions from the age of 65 after 45 years.
Restrictions for pensions at 63: Discount-free pension only for one group
Werding suggests restricting the possibility of early retirement for long-term employees to low-earners.
“For example, an early pension without deductions could then only be available to insured persons who earned less than 60 percent of the average salary of all insured persons per contribution year.”
The German pension system is under pressure, and pensions at 63 are the subject of heated debate.
The economist Prof. Martin Werding calls for restrictions on the “pension at 63”.
(Archive image) © Bernd von Jutrczenka / dpa
The economics professor from the Ruhr University Bochum further emphasizes: “The probability that they have carried out particularly stressful activities and are at their health limit before reaching the standard retirement age is significantly higher for this group.”
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“The window is closing”: Economist calls for quick measures
The plan to retain those receiving early pensions without deductions who are “healthy above average on average” as skilled workers by limiting their retirement at 63 must be implemented quickly: “Time is running out, the window is closing,” said Werding.
“Even if changes are decided now, it will take six months to a year for them to take effect.
Then another 300,000 skilled workers will be gone.”
According to reports, in 2023 around 300,000 people, more than ever before, applied to the German Pension Insurance (DRV) to retire early from working life as part of the “pension at 63”.
The German Pension Insurance explains that a good 30 percent of all pensioners can now be assigned to this group.
“If we want to stick to the regulation with regard to people in strenuous jobs, we have to at least make adjustments,” said Werding.
This only works by “holding people accountable for longer who still have room for maneuver.”
His demand: “In the future, we will only allow pensions from the age of 63 to long-term low earners.”
Pension at 63 only for low earners “unfair”: initiative causes criticism
The proposal to end retirement at 63 has met with criticism, particularly from social associations.
The President of the social association VdK Germany, Verena Bentele, told IPPEN.MEDIA: “The zero-deduction pension for those who have been insured for a particularly long time is primarily intended to reward people who have worked extraordinarily long hours with 45 years of contributions and have paid into the pension fund for a long time.”
Bentele adds: “Linking the exemption from deductions to a complicated income limit is unfair.
This would allow far fewer people to take early retirement who are already unable to work up to the standard retirement age.
Anyone who has worked for so long and often under high stress deserves to retire - no matter what their income was."
The proposal is also not suitable as a compensation for low wages, because “low wages are already being corrected through the basic pension supplement”.
With Werding's proposal, two instruments of pension law would overlap.