Pensions too low?
More and more older people are staying in their jobs
February 19, 2024, 7:10 a.m
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On average, Germans retire at the age of 64 – but many continue to work afterwards. Every second senior citizen only has a net income of less than 1,250 euros. But that doesn’t necessarily have to be the only reason.
More and more people in Germany are working between the ages of 63 and 67. The number of people of this age subject to social security contributions and marginally employed rose steadily from 1.31 million in 2020 to 1.67 million last year, according to a government response to questions from the Left in the Bundestag. In 2022, 1.52 million people in this age group in which retirement is possible were still employed.
The left-wing pension expert Matthias W. Birkwald, who made the request, is against abolishing the “pension at 63” with reference to the increased employment rate of 63 to 67 year olds. This is what the deduction-free pension after 45 years of insurance was initially called, because initially people born before 1953 were able to retire at the age of 63 without deductions. The age limit for this is now 64 years and 4 months for those born in 1960. For those born later, the entry age will increase to 65 by 2029.
Dispute over “pension at 63”
Germany’s employers, the Union, but also politicians from the Greens and FDP had spoken out in favor of moving away from the so-called “pension at 63”. Baden-Württemberg’s Prime Minister Winfried Kretschmann said in September: “We cannot afford for mainly healthy and well-earning people to retire at 63.” FDP leader and Federal Finance Minister Christian Lindner said in an interview: “Why don’t we set incentives so that people want to work longer – instead of financing pensions at 63? This is a retirement bonus for qualified employees.”
Birkwald countered such demands: Instead of wanting to abolish the zero-deduction pension for those who have been insured for a particularly long time, “we should take a closer look.” The employment of older people has increased significantly – this is what the statistics show. Employment rates among 63 to 67 year olds in Germany have increased by 26.2 percent in the past three years.
The then coalition of the Union and the SPD introduced early old-age pensions without deductions from 45 years of insurance in 2014. When it was introduced, the government forecast around 200,000 applicants every year – the forecasts are significantly exceeded year after year. In total, there were recently well over two million users of this type of pension. It is already evident here that more and more employees of the baby boomer generation are reaching retirement age. Employer President Rainer Dulger complained: “The pension from age 63 has led to a brain drain.”
Employment has increased, especially among older people
Despite a shortage of skilled workers, Labor Minister Hubertus Heil rejected calls for an end to the “retirement at 63” option: “Anyone who has worked for 45 years has the right to retire earlier without deductions.” Heil said in an interview that he would not be able to retire at 70, as many conservatives wanted. In the coming weeks he wants to present his long-announced pension reform to stabilize pensions in the long term.
When it comes to employing older people, Heil’s stated goal is to develop incentives so that people who are able to do so voluntarily work longer hours. In fact, the employment rate of older age groups has increased more strongly in the past 20 years than the overall employment rate, and “significantly”, as the Nuremberg Institute for Labor Market and Occupational Research (IAB) said in a statement Study finds.
According to the Federal Statistical Office, labor participation among 60 to 64-year-olds has increased more in recent years than in any other age group – from 47 percent in 2012 to 63 percent in 2022. Beyond the normal retirement age, the proportion of employed people has increased The number of employees increased from 11 percent in 2012 to 19 percent in 2022 – these are those who were still working between the ages of 65 and 69.
Working longer because of a low pension?
Birkwald said: “You constantly hear calls about raising the standard retirement age, abolishing the ‘pension from 63’ (…) or a so-called ‘flexible retirement’.” The employment of older people is already increasing. Employers have a duty to offer their employees good work so that they want to take advantage of the opportunity to work longer voluntarily.
Older people, on the other hand, should not be forced to continue working because of a low pension, demanded the Left-wing pension expert. Almost every second senior citizen over 65 in this country only has a net income of less than 1,250 euros. Calculations by the Federal Statistical Office at the left’s request showed at the beginning of the year that 42.3 percent of pensioners had to get by with a net income up to this limit. Of the almost 7.5 million people affected, more than 5.2 million are women.
According to the Federal Statistical Office, one reason for the increase in the number of people aged 65 and over with a job, in addition to the increase in the retirement age, is the increased level of education. “Higher educational qualifications are often associated with longer participation in working life.” The proportion of highly qualified people among employed older people is particularly high. “Working at retirement age can mean, on the one hand, being able to actively participate in social life for longer and, on the other hand, counteracting the threat of poverty in old age,” the Federal Office continued. For around 40 percent of those in employment aged 65 and over, their activity was the primary source of livelihood – but for the majority, this income was additional income in addition to pensions or assets.