Michael Hüther, Director of the German Institute for Economic Research (IW), supports raising the statutory retirement age to 70 while simultaneously decreasing the general pension level. According to Hüther, any substantive reform of the pay-as-you-go pension system must operate within its established logical framework. He points out that only three levers can be adjusted: the contribution rate, the pension level, and the age at which one can draw a pension. Consequently, he deems the current reform proposals “expected and appropriate”.
The IW Director argues that raising the retirement age correlates with a longer period of contributions, which, in itself, helps stabilize the pension level without necessitating an increase in contribution rates. Given the planned state support for private retirement savings, the overall pension level should be even higher, according to Hüther. He contends that this is fair, especially for younger generations, who have ample time to adjust. Furthermore, maintaining a contribution rate that does not rise steeply-or remains stable-is crucial for protecting the competitiveness of their jobs.
Marcel Fratzscher, President of the German Institute for Economic Research (DIW), echoed these sentiments, stating that raising the retirement age to 70 is unavoidable and deemed necessary in the short term. He emphasized that lowering the pension level is also required as part of the pact that demands Baby Boomer generations contribute to demographic sustainability.
However, Fratzscher also issued a warning regarding social consequences. He cautioned that any pension reform must end the pattern of wealth redistribution from the poor to the rich, noting that individuals with lower incomes and pensions tend to have significantly shorter life expectancies. He warned that lowering the pension level to 46% for those with modest benefits would be a severe mistake, as it would exacerbate already high levels of old-age poverty.
Separately, the publication “Bild” had reported that the Pension Reform Commission intended to propose raising the retirement age to 70 starting in 2061 and reducing the pension level from the current 48% to 46% starting in 2031. However, several members of the commission have since denied these reports.
