German Parliament Increases Retirement Age

Germany

March 9, 2007

Overriding objections from trade unions and opposition parties, Germany's lower house of parliament on Friday approved a law raising the retirement age to 67.

Under the plans, which need to be endorsed by the upper house or Bundesrat, Germans born in 1964 or later would have to work two years longer until they are entitled to claim state pension benefits.

For those born between 1947-1963 a phased increase would take place from 2012 onwards with the target age of 67 reached by 2029. People who work 45 years will still be able to retire at 65.

Juergen Peters, head of the powerful IG Metall engineering workers' union, called the decision "counterproductive," while Michael Sommer, leader of the DGB trade union federation, said it was tantamount to lowering retirement benefits.

Thousands of union members demonstrated in the German capital against the government's plans.

Deputies from Chancellor Angela Merkel's ruling coalition had argued that making people work two years longer would help the government tackle the problem of population ageing and provide more security for future generations.   Opposition legislators countered that the new law would not solve the problem but would lead to an increase in unemployment and poverty among the elderly.

Germany has one of the lowest birth rates in Europe, which experts say will lead to a steadily shrinking workforce and an ageing population.

Germans are also living longer, according to statistics that estimate people who are aged 65 in 2050 will live 4.5 years longer than those at the same age today.

The government hopes that by keeping people in jobs longer, it will reduce the burden on the state pension fund when Germany's demographic transition starts to become acute from 2010.

The law, which was approved by a vote of 408 to 169, with four abstentions, is part of Merkel's reform programme that includes a revamp of health care and the labour market.