The proposal to retire at 70 is not only unpopular with employees. But the pension has a financing problem, since life expectancy is increasing, but the birth rate is falling. Five graphs show how ailing the system is.
It is a sentence that has caused violent reactions: “We will gradually have to go up to the retirement age of 70 years – also because the age continues to rise.”
That’s what the president of the employers’ association, Stefan Wolf, said in an interview with the newspapers of the Funke media group and promptly aroused the anger of trade unions and social organizations. Left parliamentary group leader Dietmar Bartsch even spoke of “antisocial bullshit”.
But the fact is: the pension has a financing problem. The then Labor Minister Norbert Blüm had regularly emphasized until the 1990s: “The pension is secure”.
In the future, however, this promise will turn out to be too optimistic for some Germans. Soon there will no longer be enough pension for all of us. Some experts are even warning of the system collapsing.
But what is wrong with German pensions – and how bad is it really going to be? An overview of the problems in graphics.
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One of the main problems of the German pension system: There are too many pension recipients and too few contributors – and this imbalance is constantly increasing.
The proportion of people in the total German population who are 65 and older has increased steadily since the 1960s. According to this, in 1960 around every tenth German citizen fell into this age group – in 2020 this was already the case for around every fifth. According to calculations by the Federal Institute for Population Research, by 2060 almost every third person could be more than 65 years old. Demographic change is in full swing in Germany, and with it the burden on the pension system is increasing.
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More than 1.3 million people are already retiring in Germany every year. This number is likely to increase further in the coming years. That’s because more and more baby boomers are nearing the end of their working lives. The baby boomers born between 1955 and 1965 are called baby boomers. At that time, the economic miracle caused increasing birth rates. The baby boomers will leave a gap in the labor market that will not only put a considerable strain on the state pension system in the coming years, but will also exacerbate the shortage of skilled workers in Germany. Because there are simply not enough young people.
According to analysts at the Federal Statistical Office, the number of people in work (aged 20 to 66) in Germany could, in the worst case, shrink by almost four million by 2030. Another 30 years later, there are only 31.5 million workers in this scenario. But even if the experts are more optimistic, the end result will still be an overall decline in employment.
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It is true that politicians have been gradually raising the standard retirement age to 67 since 2012 – and this will continue until 2029 – in order to relieve the state pension system. However, this requirement has not kept pace with the actual retirement age. The gap between the average retirement age and the statutory retirement age in Germany has recently been increasing again.
Men drew an old-age pension for the first time in 2020 at an average age of 64.1 years, women at 64.2 years. At the same time, the standard retirement age actually increased to 65.8 years. In order to take pressure off the pension system, a stronger increase in the actual retirement age would be necessary.
The chart shows that the average retirement age has mostly been lower than the standard retirement age since the 1970s. The reason for this is, among other things, the type of pension in 1972. At that time, the early retirement and early retirement options were significantly expanded, which is why the average age at entry was high as a result. It reached a low point in 1982 at 62.3 years for men and 61.5 years for women.
One thing is certain: the German pension system is increasingly getting into trouble. The number of contributors has increased by around 20 percent over the past three decades. In the same period, however, the number of old-age pensioners increased by 55 percent. Added to this is the constantly increasing life expectancy of pensioners, which is also one of the main stress factors for the pension system.
Mathematically, there are currently 2.1 contributors for a pensioner. At the beginning of the 1960s, the ratio was even more solid: there were six actively insured persons for every retiree, as data from the Federal Institute for Population Research shows.
This relationship is likely to deteriorate further in the future. According to forecasts by the German Economic Institute (IW), in 2030 there will be 1.5 contributors for every pensioner. In 2050 there could even be only 1.3 contributors.
