Germany lifts pension age to 67 to counter demographic changes

Mar 30 | Updated: Mar 31 2007, 05:30am hrs
Germanys Upper House of Parliament approved a bill raising the retirement age to 67 from 65, a measure aimed at countering a drain on state pension reserves caused by an ageing population. Just under half of Germanys 82 million residents will be affected by the new law, which applies to anyone born after 1964.

They will have to wait up to two years longer before they qualify for the national pension. Starting in 2012, the retirement age will be raised in stages.

The measure aims to help keep monthly pension contributions to under 20% of gross wages to help company competitiveness and tackle the effects of demographic changes on the compulsory pension. In 1960, there were eight workers supporting each pensioner; thats since fallen to 3.2 people and is forecast to be just 1.9 people for every pensioner by 2030. Its obvious this will have consequences which have to be met in a way thats sensitive and fair to future generations, labour minister Franz Muentefering, the plans architect, told lawmakers during a speech in the upper house before the vote.

The government expects the average lifespan for people aged 65 to rise by 2.8 years by 2030, according to the bill, which will take effect at the start of next year. The drawing time for pensions in Germany has increased by 7 years to 17 years over the last 47 years and will amount to 20 years by 2030. Germanys DGB labour union federation has protested against the bill, arguing that making people work longer before they can retire does nothing for some 1.2 million people over 50 who currently seek jobs.

To combat unemployment among those workers, Muentefering will launch a program dubbed 50 plus to persuade companies to hire older people, offering subsidies to employers who hire staff. Just 45% of people aged 55-to-64 were in work last year compared with 70% in Sweden and 65% in Switzerland, according to the Federal Statistics Office.