Retirees may have to brace for leaner times

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Retirees may have to brace for leaner times
Government commission will propose lower pensions and longer working life, reports say

Frankfurter Allgemeine Zeitung

August 22, 2003

The German government is reportedly readying cutbacks in the country's demographically challenged pension system.

According to press reports in the daily Handelsblatt and some other media, when the Rürup Commission presents its reform proposals next Thursday it is likely to recommend smaller annual increases or even a freeze in pension payments. Also expected from the commission, which is charged with recommending reforms to the health and social systems, is a raising of the official retirement age from 65 to 67 by 2025 and a ban on early retirements before age 64. German pensioners currently see their payments upped in line with the average increase in gross wages. The actual average retirement age in Germany is below 60, by some measures, with many companies using early retirements as a way of transferring the cost of layoffs to the state.

“One year without an increase in pension payouts alone does not solve any of our pension problems,“ Bert Rürup, the commission chairman, told the Frankfurter Allgemeine Sonntagszeitung. Under the earlier pension reform, which replaced some state pension payments with subsidies for voluntary private retirement insurance, payments will be scaled back to an average of 41.6 percent of gross wages from the current 48 percent by 2030. Pension payroll withholdings currently amount to 19.5 percent of gross pay, and the government has repeatedly promised not to hike this levy again before 2005.

Opposition politicians and labor unions, responding to the apparent leaks from the Rürup Commission, warned the Social Democratic-Green coalition government to keep its hands off current pension payments, arguing that pensioners had a right to a reliable income.

The parliamentary leader of Chancellor Gerhard Schröder's Social Democratic Party, Franz Müntefering, said he doubted that all the commission's proposals would be implemented “in their present form.“ The German Health and Social Affairs Ministry said it would not present a comprehensive pension reform plan before the fall.