Pension reform: DIW president calls for abolition of 'retirement at 63'

Marcel Fratzscher, president of the German Institute for Economic Research (DIW), has called the planned abolition of the penalty-free "Rente mit 63" (retirement at 63) an indispensable part of pension reform. He told the "Rheinische Post" that eliminating this benefit is the most crucial and financially significant element of the proposed changes.

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The abolition of the Rente mit 63 is a central and financially the most important element of the planned pension reform.

Fratzscher estimates that abolishing the "Rente mit 63" would lead to long-term savings of nearly 10 billion euros and create approximately 125,000 additional employment positions per annual cohort of retirees. "Without this element, the pension reform is dead," he stated, warning that the federal government would need to restart the entire process and fundamentally re-evaluate the financing of the statutory pension system.

Furthermore, Fratzscher argued that without this change, the statutory pension system would increasingly redistribute funds from younger to older generations and from poorer to wealthier individuals. He noted that the "Rente mit 63" disproportionately benefits higher earners and men, while being less accessible to those at risk of old-age poverty.

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Without this element is the pension reform dead.

However, the three CDU state premiers from eastern Germany, Michael Kretschmer (Saxony), Sven Schulze (Saxony-Anhalt), and Mario Voigt (Thuringia), have publicly opposed the pension commission's recommendation. In a letter to the federal government, they defended the penalty-free retirement at 63, asserting that individuals who have contributed for 45 years have paid enough. This stance directly challenges the commission's proposal to eliminate early retirement without penalties after 45 years of contributions.

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Because those who have paid in for 45 years have paid in enough. We will not give up this principle.

Chancellor Friedrich Merz (CDU) and Labor Minister Bärbel Bas (SPD) have previously expressed their intention to fully implement all recommendations from the pension commission. The CDU parliamentary group leader Thorsten Frei and party general secretary Franziska Hoppermann reiterated the CDU's commitment to abolishing the "Rente mit 63" as part of a reform package. CSU leader Markus Söder also opposes reopening the entire package. Bas, responsible for the issue within the cabinet, described the reform as a "total work of art" and urged the Union to clarify its position on the abolition. She indicated openness to reopening the package if the Union agreed, but noted she had not yet seen such consensus.

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The Rente mit 63 is a common, but no longer quite correct, catchphrase: Currently, early retirement without deductions after sufficient insurance periods is possible from the age of 64.5.