Monthly report: The Bundesbank proposes to link the retirement age to life expectancy

Germany monthly report

The Bundesbank proposes to link the retirement age to life expectancy

“21 million pensioners in Germany will benefit from it”

Seniors in Germany will soon receive a significantly higher pension. From 1 July, pensions in West Germany will increase by 5.3% and in East Germany by 6.1%, announced Hubertus Heil (SPD). “We want to keep long-term pensions stable,” said the Federal Labor Minister.

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The Bundesbank estimates that the German economy grew slightly in the spring. Although inflation led to reluctance to buy, the hospitality sector was recovering. The Bundesbank also has an idea on how to stabilize long-term statutory retirement.

IIn a difficult environment, the German economy has experienced some growth in the current quarter, according to estimates by the Bundesbank. “In the spring of 2022, the German economy is expected to grow slightly,” the Bundesbank confirmed in its June monthly report, released Monday.

While the broad lifting of restrictions to contain the corona pandemic has provided a recovery in the hospitality sector, for example, high inflation has curbed the desire to buy from many consumers. Supply bottlenecks and material shortages continue to cause problems for the industry, in addition to rising energy costs, for example.

“In April, the industry managed to recoup a small fraction of the production losses it suffered in March,” Bundesbank economists summarized. “However, the industry cannot be expected to make a significant contribution to overall growth.”

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According to the economic forecasts released by the Bundesbank on June 10, the consequences of the war in Ukraine will slow economic growth in Germany and increase inflation in 2022 as a whole. With growth of 1.9%, the economic recovery after the krona low is likely to continue. In December, however, the central bank still assumed that real gross domestic product (GDP) would increase by 4.2% in 2022. For 2023, Bundesbank economists forecast economic growth of just 2.4% instead of the 3.2%.

Link your retirement age to life expectancy

The Bundesbank believes that linking the retirement age to life expectancy could stabilize the long-term statutory pension system. In many EU countries, the retirement age is increasing with life expectancy, explains the Bundesbank.

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“It is not only the collection phases of the pension that are getting longer, but also the contribution phases.” This greatly reduces the pressure of having to continually adjust other variables, such as the contribution rate and federal tax-funded funds for the pension fund, according to central bank economists. “Coupling significantly reduces the pressure on the contribution rate and the federal budget.” The retirement age should therefore not be regularly discussed again.

Joachim Nagel, president of the German Bundesbank

Joachim Nagel, president of the German Bundesbank

Those: dpa / Federico Gambarini

SPD, Verdi and FDP have set themselves the goal of guaranteeing “permanently” the minimum pension level – that is, the ratio between pension and average salary – of 48 per cent. The members of the traffic light have 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, professionally managed and globally invested fund.

The age limit for receiving the statutory pension was gradually raised from 65 in 2012 to 67 in 2031. In 2019, the Bundesbank fueled the debate on further raising the retirement age to nearly 70. In its current monthly report, the Bundesbank confirms: “Simulations up to 2070 show that the pressure on retirement finances will significantly decrease if the retirement age continues to gradually increase after 2031. It is true that the contribution rate and federal funds continue. to grow significantly. In the long run, however, they will increase less than if the retirement age remains the same. “

In general, the Bundesbank advises the federal government to be as transparent as possible about how much a certain level of pension costs to older people: basic compared to current pension insurance reports. Because the calculations should also offer guidance for those who are currently at the beginning of their working life ”.

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