Merz backs plans to raise Germany’s retirement age to 70 in pension changes | Germany

Germany will gradually raise the retirement age to 70 In line with recommendations promoted by Chancellor Friedrich Merz in the early 2090s as a way to future-proof the pension system for the aging population.

An expert commission set up to investigate reforms to the pension system, presenting its findings on Tuesday, said the retirement age should be linked to increasing life expectancy and early retirement should be cancelled.

Merz stated that the measures will prevent the collapse of the creaking pension system and strengthen the social contract between generations, adding, “No citizen needs to worry.” He argued that young people would be given “a reason for optimism” with measures that would “lift a tremendous burden” from their shoulders.

The panel of experts held long day-long hearings from January until the presentation of its 33-point plan on Tuesday.

Among its main recommendations is that the compulsory contributions made by workers and employers should be deposited in the stock market in order to increase and preserve the value of the fund for future generations. He also proposed extending compulsory pension contributions to civil servants and self-employed workers.

The current retirement age for anyone retiring in Germany in the early 2030s is 67, a figure set nearly two decades ago. This should be increased gradually in line with life expectancy, rising to around 70 by the early 2090s, the panel said.

Germany has one of the world’s fastest-aging populations and, like many western countries, faces a challenge in how to ensure its pension system has a future as fewer and fewer workers fund the pensions of increasingly longer-living retirees.

The government hopes to pass the reforms before the summer recess next month, but they still need to be debated and voted on in parliament. “All elements of this reform package now need to be implemented quickly,” Merz insisted, emphasizing: “Failure is not an option.”

The leader of the conservative Christian Democrats said his coalition was united in not wanting to get caught up in the weeds of wording after some left-wing members of the government’s junior coalition partners, the Social Democrats and unions, questioned the fairness of some recommendations.

Critics have taken aim at a proposal to scrap the right of those who have worked for 45 years to retire at 63 without seeing a cut in their pension, saying it would penalize people working in physically demanding and low-paid jobs such as builders or carers. Experts note that this generally benefits men who work in well-paying positions and have a proven uninterrupted employment history.

“We cannot afford to isolate or reject individual measures,” Merz said, adding that the reform commission had created “a comprehensive concept that works as a whole.”

Merz is under pressure to show that his government, which has been in office for more than a year but is struggling at the polls and beset by internal strife, can deliver on promises of sweeping economic and social reforms to revive Germany’s flagging economy.

Germany’s pension system is the oldest state-supported system of its kind in the world. It was introduced in 1889 by Chancellor Otto von Bismarck as political tactics by which he hoped to undermine the rise of the socialist movement by alienating workers from unions and focusing their loyalty on the German empire.

The original retirement age was set at 70; this was an age reached by far fewer workers at the time. More than 200 years have passed since the beginning of the pension system; For anyone born starting in 2021, that number could be 70 again.

According to the latest statistics in 2024, around 23% of Germans – that is, 19 million – will be aged 65 or over, compared to only 15% in 1991. The average life expectancy for men is 78.5 years and for women it is 83.2 years.

Critics said dependence on the capital market in the reforms was unwelcome and could lead to instability, especially at a time when the economy was doing poorly. Germans generally oppose investments and prefer to use savings accounts.

Merz, a former investment banker, emphasized the importance of taking a long-term perspective. “The use of the capital market in statutory pension planning is perhaps the key factor in determining the long-term viability and stability of our pension system,” he said.