Work until almost 70? The proposal to raise the retirement age is a horror scenario for many people. Axel Börsch-Supan, one of the authors of this report from the Ministry of Economic Affairs, tries to put things right in an interview with Capital.de.
What do you think of the debate about the higher retirement age that has now started?
Axel Börsch-Supan: I have to say, I find it completely hysterical. That we are now having this debate is probably only due to the general nervousness at the moment.
But you made a suggestion that the retirement age should be raised to 68, right?
No we have not.
So what?
What we have proposed is just a principle at first. Namely the principle that if life expectancy changes, the retirement age must also change. If people were getting significantly older than they are today, it would be unreasonable to continue to retire as they are now. And our suggestion is: If you live three years longer, you can have a year longer retirement and work two years longer.
So an increase after all?
We know that we can finance our pension system if people work an average of 40 years and have a pension for 20 years. In this respect, it is only sensible to use the same principle for additional years of life gained. That’s the only thing we recommended. But it’s not about doing it right away.
What do you mean?
The question is, when do we gain an average of three years of life? If you follow the Federal Statistical Office, you come to roughly the year 2042, i.e. in 21 years – only then will we have statistically gained three years. This means that if we currently have a retirement age of 66 years – that is, we are no longer 65 and we have not yet reached 67 – then we should retire at an average of 68 years in 2042.
What specifically did you recommend?
What we have said is that if that really works out with the additional three years of life, then in the 1930s you will have to be able to change something about the retirement age in the 1940s.
That doesn’t sound like we have to debate this now, does it?
No, this is not an issue to be debated in an election campaign. It is important to calm the debate, but we should not have it today. One should know that the report has not been written now either.
Then when?
We essentially wrote that last year. But it took a while until it was published. The Scientific Advisory Board works very thoroughly – and therefore very slowly.
If we are having this debate, shouldn’t it be about something else – a more flexible pension, for example?
Yes, absolutely right. And that’s what we said in the report. We want to abolish the standard retirement age and introduce a retirement window, i.e. an earliest and a latest retirement age between which one can retire flexibly. Plus / minus three or four years. That is a very important point.
Why?
There are several reasons for this. On the one hand, there are people who really enjoy doing their job. They may not even want to retire on a certain date. Then why shouldn’t they be able to stay longer? But there are also people who can’t wait to retire. In addition, we have to take care of the people who work physically and who simply can no longer pursue their profession in old age. We all know the story of the roofer who is worn out at some point – and there are many other professions. Setting the same retirement age for everyone is gross nonsense.
But the proportion of those who work physically is decreasing, isn’t it?
Yes, that is. But they are still there and you have to take care of them. I don’t think the problem is with the pension. It is absurd that employers let their people work in a physically demanding job until they are worn out. That’s inhuman. It makes more sense for a roofer to go on the roof until he is 50 and then do something else – maybe sell roofing tiles. And that’s how it should be in other professions as well. Then you don’t have to send people into early retirement and then they still have something from their retirement afterwards.
Who is asked that we achieve this?
This is where employers are in demand. You have to become more flexible and shift more between young and old. You have to learn to take advantage of the structural change in work.
Why is the pension issue so explosive?
Axel Börsch-Supan is an economist and mathematician and heads the Munich Center for the Economics of Aging (MEA), which is part of the Munich Max Planck Institute for Social Law and Social Policy. There he researches, among other things, social security systems and the savings behavior of Germans.
(Photo: imago / Horst Galuschka)
This is because the pension system will become more expensive by leaps and bounds in the coming years. Erratic but predictable. Because now the many baby boomers are retiring. At the same time, everyone has had fewer children, so there are fewer paying in. We have known all of this for 20 or 30 years. This is nothing new. But if you want to win elections, who are you looking at? Not on the children, but on those who vote, and those are the ones who are already or will soon be receiving a pension. The parties and unions are outdated and rely on these voters. That is why politicians are delaying reforms and inventing holding lines that you know you cannot keep.
Can you briefly explain these stop lines?
In principle, the current pension level and an upper limit for contributions were set until 2025, ignoring the fact that the baby boomers are now retiring. Their financing does not work with the current contribution rate and the current benefits.
And hence the proposal to raise the retirement age in the long term?
Yes, but not only. That is one of four building blocks that we have proposed. Another is that you have to increase contributions. But that should happen slowly, which is incompatible with the hold line. The next step should be to stop making pension increases as generous as in the past. And then you should also contribute from tax revenues. All four together distribute the load over as many shoulders as possible.
Successively increasing contributions will not necessarily please future generations. Only slightly increasing earnings either.
Yes, so it is not surprising that the last pension commission failed because of this. She did not manage to resolve this generation gap. But politics must. What we need is a reliable intergenerational contract that can be built on. But it is clear that in the future we will have to finance something that we did not have to finance before. And that doesn’t do with just handing out gifts. It’s like with climate change, we can’t solve it with gifts either, but it costs us something – unfortunately that is also the case with demographic change.
With Axel Börsch-Supan Bastian Hosan
The interview first appeared at Capital.de.
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