Link to life expectancy
IFO Institute: Employees should retire later
January 16, 2024, 11:26 a.m
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These are explosive ideas: The IFO Institute advocates linking the entry age to life expectancy. In addition, pension increases should be based on the inflation rate, it is said. Economic experts don’t believe in a pension fund “for everyone”.
The IFO Institute advocates linking the retirement age to increasing life expectancy. “Some of our neighboring countries have already decided this – the Netherlands, Sweden and Finland,” said pension expert Joachim Ragnitz from the IFO Dresden branch.
In the Netherlands, for example, the rule applies: If people live three years longer, they have to work two years longer and get a year longer pension. The ratio of pensioners to employed people would therefore remain stable at around 40 percent even after 2040 – and not rise to almost 50 percent, as currently forecast.
It is also worth considering no longer linking pension increases to wage increases as is currently the case. Instead, they should be guided by the inflation rate, which is usually lower. This would slow the increase in pension spending.
However, according to the IFO researchers, including the self-employed and civil servants in the payment of contributions, as is often required, does not make sense. This solution would relieve the burden on pension funds in the short term. In the long term, however, the payouts for these groups would be significantly higher – among other things because they would have a longer life expectancy.
Heil rejects a higher retirement age
The law currently stipulates that the pension age limit will gradually increase to 67 by 2031. Economists are also among those in favor of a later start to retirement. In their current annual report for the federal government, they also advocate “linking the statutory retirement age to future life expectancy, combined with a new form of supplementary, funded retirement provision”.
Federal Labor Minister Hubertus Heil has so far rejected a further increase. In his view, this would be at the expense of the younger generation who are retiring after the baby boomers.