Proposal for more stability
Bundesbank: Link retirement age to life expectancy
06/20/2022, 1:58 p.m
The Bundesbank proposes that the age-related end of a professional career could be linked to life expectancy. Then there would not have to be a constant debate about the entry age. For many, however, this would mean later retirement.
The Bundesbank believes that linking the retirement age to life expectancy could stabilize the statutory pension system in the long term. In many countries of the European Union, the retirement age is now increasing with life expectancy, according to the Bundesbank in its monthly report for June.
“Thus, not only are the pension receipt phases extended, but also the contribution phases.” According to the central bank’s economists, this noticeably reduces the pressure of constantly having to adjust other variables such as the contribution rate and the tax-financed federal funds for the pension fund. “The coupling noticeably reduces the pressure on the contribution rate and the federal budget.” Also, the retirement age would not have to be debated regularly.
The SPD, the Greens and the FDP have set themselves the task of securing the minimum pension level – i.e. the ratio of the pension to the average wage – of 48 percent “permanently”. The traffic light partners ruled out pension cuts or an increase in the retirement age. Instead, they promised to save new capital for the pension fund: as a permanent fund, professionally managed and invested globally.
Pressure on pension finances could ease
The age limit for drawing the statutory pension has been gradually raised from 65 in 2012 to 67 in 2031. In 2019, the Bundesbank fueled the debate about a further increase in the retirement age to almost 70 years. In its current monthly report, the Bundesbank confirms: “The simulations up to 2070 show that the pressure on pension finances will ease noticeably if the retirement age continues to increase gradually after 2031. The contribution rate and the federal funds will still increase significantly, but in the long term they will decrease less than with the same retirement age.”
In general, the Bundesbank advises the federal government to be as transparent as possible about what a certain level of pension costs people in old age: “Despite all the estimation uncertainty, there is a lot to be said for taking a much longer period as a basis than in the current pension insurance reports. Because the calculations should also be for those provide orientation who are currently at the beginning of their working lives.”