Merz backs plans to raise Germany’s retirement age to 70 in pension changes

Germany will gradually raise its retirement age to about 70 by the early 2090s under recommendations backed by the chancellor, Friedrich Merz, as a means of future-proofing the pension system for an ageing population.Presenting its findings on Tuesday, an expert commission set up to explore reforms to the pension system said retirement age should be linked to rising life expectancy and early retirement should be scrapped.“No citizen needs to worry,” said Merz, as he said the measures would prevent the collapse of the creaking pension system and strengthen the social contract between generations. Young people, he argued, would be given a “reason for optimism” by the measures, which would “lift a tremendous burden” from their shoulders.The commission of experts sat for long daily sessions from January until its 33-point plan was presented on Tuesday.Among its key recommendations are for the obligatory contributions made by workers and employers to be invested in the stock market in order to increase and safeguard the fund’s value for future generations. It also proposed expanding compulsory pension contributions to include civil servants and self-employed workers.The current pensionable age for anyone retiring in the early 2030s in Germany is 67, a figure set about two decades ago. The panel said this should be gradually increased in line with life expectancy, rising to about 70 by the early 2090s.Germany has one of the fastest-ageing populations in the world and, like many western countries, has faced a challenge over how to ensure the pension system has a future when ever fewer workers are financing the pensions of ever more, ever longer-living retirees.The government hopes to pass the reforms before the summer recess next month, although they must still be debated and voted on in parliament. “All elements of this reform package must now be implemented swiftly,” said Merz, insisting: “Failure is not an option.”The leader of the conservative Christian Democrats said his coalition was united in not wanting to get caught in the weeds of the wording, after some leftwing members of the government from his junior coalition partners, the Social Democrats, as well as trade unions, had questioned the fairness of some of the recommendations.Critics targeted the proposal to scrap the right of those who have worked for 45 years to retire at 63 without seeing any reduction to their pension, saying it would penalise those in physically demanding and lower-paid jobs, such as builders or carers. The experts pointed out this had often benefited men in well-paid positions who had a proven unbroken employment record.“We cannot afford to isolate or reject individual measures,” Merz said, adding that the reform commission had created a “comprehensive concept … that works as a whole”.Merz is under pressure to show that his government – in office for just over a year, but struggling in the polls and beset by internal wrangling – can deliver on its promises of sweeping economic and social reform in an effort to reinvigorate Germany’s flagging economy.Otto von Bismarck, the chancellor of Germany 1871-1890, introduced the country’s state pension scheme in 1889. Photograph: APGermany’s pension system is the oldest state-backed system of its kind in the world. It was introduced by Chancellor Otto von Bismarck in 1889 mainly for political tactics, as he hoped to undermine the rise of the socialist movement by luring workers away from trade unions and focusing their loyalty instead on the German empire.The original retirement age was set at 70 years old, an age which far fewer workers reached back then. Just over 200 years since the pension system’s introduction, it could be 70 once again for anyone born from 2021 onwards.According to latest statistics from 2024, about 23% of Germans – or 19 million – are 65 years or older, compared with just 15% in 1991. The average life expectancy for men is 78.5 years and 83.2 years for women.Critics said dependence on the capital market in the reforms was unwelcome and could lead to instability, especially at a time when the economy was doing poorly. Germans are in general often averse to investments, preferring to use saving accounts.Merz, a former investment banker, stressed the importance of a taking a long-term perspective. “The use of the capital market in the statutory pension scheme is perhaps ​the key factor in determining the long-term viability and stability ‌of our pension system,” he said.