Pensions economist Axel Börsch-Supan stated that there is no necessity to raise the retirement age to 70. According to his comments to “Welt am Sonntag”, he pointed out that life expectancy increases very slowly, estimating that people would need to work an additional year for roughly every fourteen years that pass. Therefore, he argued, a pension at age 70 is a far-fetched proposition.
Instead, the head of the Munich Research Institute for the Economics of Aging (MEA) advocates for greater flexibility regarding the retirement process, proposing higher deductions for those who choose to leave the workforce early. He challenged the current deduction rate of 3.6 percent, calculating that it should realistically be five percent.
Börsch-Supan identified two major policy errors concerning pensions: maintaining the guaranteed pension level floor and allowing the deduction-free pension after 45 years of work. He warned that the level floor alone could generate additional costs amounting to “around 200 billion euros”. Furthermore, he cautioned that a sharp mandatory contribution hike of approximately two percentage points threatens to occur by 2031 at the latest, once the pension insurance reserve, currently valued at about 40 billion euros, is depleted.
He called the pension benefit at age 63 particularly detrimental, noting that-surprisingly-it is predominantly utilized by highly paid and healthy workers. Eliminating this benefit, he calculated, could keep more than half a million additional workers within the system over a span of two years.
