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May 23, 2014

German parliament clears way for retirement at 63

Pension reform passes through parliament despite some economists’ warnings
    
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BERLIN (Reuters) — Germany's grand coalition government pushed a flagship pension reform through parliament on Friday to lower the retirement age to 63 for some citizens, despite warnings from economists that the move could hurt the economy.

A previous 'grand coalition' government of conservatives and Social Democrats (SPD) had agreed in 2007 to gradually raise the official retirement age to 67 from 65 between 2012 and 2029. But that plan was discarded and a reduction agreed at the SPD's behest in negotiations for the present coalition in 2013.

The new legislation passed easily through the Bundestag lower house of parliament, thanks to the large majority enjoyed by Chancellor Angela Merkel's conservatives and the SPD.

There were 460 votes for the reform while 64 voted against and 60 abstained. Merkel's coalition has 504 lawmakers.

Early retirement was a pet project for the SPD though economists have warned that Germany, with its ageing population and shortage of skilled labour, could suffer under the cost.

Germans work longer than Greeks, Spaniards and French people, says Eurostat, retiring after about 37-1/2 years in employment. The EU average is 35 years. But the reform raised eyebrows given that Germany has demanded economic sacrifices from its struggling euro zone peers.

Under the new plans, some people will be allowed from July to retire on a full pension at 63, provided they have worked for 45 years. Those who had been unemployed for a short time can also retire early; but people cannot stop work at the age of 61 by claiming unemployment benefit for two years and then taking up early retirement at 63.

The whole measure will cost about 900 million euros in this year ($1.3 billion CAD), rising to 3.1 billion euros a year in 2030 ($4.6 billion CAD).

In addition, some 9.5 million mothers or fathers whose children were born before 1992 will receive higher benefits. This measure will cost 6.7 billion euros ($9.9 billion CAD) a year and will be paid for mainly via social security contributions.

The plans also set rules for people who retire early for health reasons. Those measures will cost 100 million euros in 2014, rising to about 2.1 billion euros in 2030.

Germans work longer than Greeks, Spaniards and French people, says Eurostat, retiring after about 37-1/2 years in employment. The EU average is 35 years. But the reform raised eyebrows given that Germany has demanded economic sacrifices from its struggling euro zone peers.

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