Young Germans will have to work for even longer than feared to pay for their parents' pensions, according to the Bundesbank. Calculations from Germany's central bank counter government claims that planned increases in the retirement age are sufficient to cover the costs of the country's ageing population.
Older workers in the euro zone’s largest economy can now retire after 45 years in employment or at 65. The government has planned to gradually increase the retirement age to 67 by 2029. But economists at the influential Bundesbank have said that is unlikely to meet the cost of financing pensions for the rising number of retirees.
Instead the retirement age would, after 2029, have to rise by another two years by 2060. That means a 25-year-old entering the German labour force today would have to work four more years than the current crop of retirees – until they are 69.
The Bundesbank said in its latest monthly bulletin, published yesterday: “Overall, there is evidence that a longer working life and a higher statutory retirement age should be given more consideration.”
The central bank added that raising the pension age towards 69 between 2030 and 2060 would help plug the financing gap associated with the higher number of pensioners.
Played down
Chancellor Angela Merkel quickly played down the Bundesbank's claims.
Steffen Seibert, Ms Merkel's spokesman, said on Monday that the government stood by its programme to raise the retirement age to 67 by 2029. "This is sensible given the backdrop of [the country's] demographic development," Mr Seibert said. "There are always discussions and sometimes the Bundesbank also takes part in such discussions."
The report comes amid political pressure to hand out electoral gifts to pensioners, who tend to vote in far greater numbers than younger voters. With Bundestag elections due in autumn 2017 and two regional polls next month, Ms Merkel is anxious to avoid any association with unpopular plans for lifting the retirement age.
The Social Democrats, coalition partners of Ms Merkel’s CDU/CSU, are pushing for government-funded pension boosts for low-earners. They have put the chancellor under pressure to come up with pensioner-friendly proposals of her own.
The government has said it would top up pensions for older women who had dropped out of paid employment to bring up children. But Ms Merkel faces criticism from CDU/CSU economic liberals who fear the state will pledge more than it can afford.
Germany has one of the fastest-ageing societies in the world and economists have expressed concern over how to cover the costs of a large number of retirees and a shrinking labour market.
Reforms to allow workers with 45 years of service to retire before the age of 65 attracted criticism from economists when they were unveiled in 2013 shortly after the election of the coalition government, led by Ms Merkel.
– Copyright The Financial Times Limited 2016
