German Economic Advisors Propose Raising Retirement Age and Linking Pensions to Inflation

Ahead of the German government's Rentenkommission releasing its pension reform proposals, prominent economists Monika Schnitzer and Gabriel Felbermayr have put forward their own recommendations. Schnitzer, chairwoman of the Council of Economic Experts, suggested in a Spiegel interview that the retirement age should be raised and the option of retiring at 63 without deductions should be rescinded.

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If we all live a year longer on average, then we should also work a part of that year longer.

Furthermore, Schnitzer proposed that pensions should not increase at the same rate as wages. Felbermayr, also a member of the Council of Economic Experts, echoed the call for changes. He argued that the retirement age should be tied to life expectancy. Instead of linking annual pension increases to average wage development, he suggested basing them on inflation.

"If we all live a year longer on average, then we should also work a part of that year longer," Felbermayr stated, noting that many countries in the Organization for Economic Cooperation and Development (OECD) already operate under such a system. He believes Germany should adopt this approach as it is both fair and logical. Felbermayr justified linking pension increases to price development over wage growth by pointing out that wages typically rise faster than prices. He asserted that this change would be fair, ensuring "no pensioner loses purchasing power."

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no pensioner loses purchasing power.

Schnitzer also highlighted company pensions as a "sensible safety net alongside the statutory pension," provided they do not increase labor costs. She suggested that employer contributions to company pensions could be offset by lower wage increases. Yasmin Fahimi, head of the German Trade Union Confederation, recently proposed mandatory company pensions. Schnitzer added that it would be important for employees to be able to take their company pension with them when changing jobs without loss, noting that while this has not always been possible, the new company pension law is moving in the right direction.

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sensible safety net alongside the statutory pension.