Because there is a shortage of workers everywhere, the Chancellor wants to retire at 63. The model could not last much longer. If you want to retire before the regular limit, you will probably soon have to do without a lot of money. How much is it and what can you do to prepare for it?
Sometimes political fate is ironic: when Andrea Nahles (SPD) was still Federal Labor Minister, she introduced the so-called “pension at 63”. The aim of the law was to reward people who have paid into statutory pension insurance for at least 45 years. They do not have to work until they are 65 or even longer, but can retire at 63 with no deductions. Nahles is now the head of the Federal Employment Agency, and one of her main tasks is to provide companies and authorities with sufficient staff. The fact that so many take advantage of this early retirement doesn’t suit her at all. In view of the shortage of skilled workers and unemployment, every month that is worked less is poison for Germany. According to the Institute for Labor Market and Vocational Research, there are currently 1.8 million vacancies to be filled.
And it is precisely in this situation that the average retirement age in Germany remains at around 64 years – after having risen by almost two years since 2000. The legal entry limit has been raised since 2012 and will rise from 65 to 67 by 2031. It is currently 65 years and 11 months. That may be a very significant number for people of this age, but viewed across Germany, it is even more important when people actually retire. And that’s still the case at not even 64 years old.
The state has some levers to increase the real retirement age. The essential thing is to abolish the pension at 63, say economists like Martin Werding. Olaf Scholz has apparently heard this and gives a damn about the fact that his own party introduced the pension at 63. In an interview on Sunday, the Chancellor said: “It is important to increase the proportion of those who can really work until retirement age.” A simple sentence that could herald an epochal change for the SPD’s pension policy. Irrespective of the question of what is fair, an entire age cohort is now wondering: Will I still benefit from retirement at 63 or how can I retire earlier with as few deductions as possible?
The answer looks like this: According to the German pension insurance, around 270,000 people took advantage of the pension at 63 in 2021. That was 26 percent of all new pensions – the proportion of early retirees was rarely as high as it is now. The regulation was primarily intended for the baby boomers born between 1951 and 1963, where many began their apprenticeships right after school at the age of 15 or 16. This option is worth real money. But those who retire earlier without a pension at 63 forego 3.6 percent of their actual pension entitlements. An example calculation: If an employee who would receive a gross pension of EUR 1,500 per month retires a year before the statutory retirement age, he or she will forego 3.6 percent of his pension – which corresponds to EUR 54 per month. And that permanently for the entire term of his pension. At 20 years, that would be almost 13,000 euros.
This is exactly what the pension at 63 is supposed to prevent: Anyone who has paid into the statutory pension insurance for at least 45 years, cared for people or raised children could retire on July 1, 2014 at the age of 63. Deductions are not made in these cases. This rule applies to anyone born in 1952 or earlier. Over the years the limit has increased. For people born in 1964, “retirement at 63” should now, strictly speaking, mean “retirement at 65” – because only then can they retire earlier with 45 insured years without deductions.
But it is not foreseeable how long this early retirement will continue after the Scholz statement. It can be considered certain that something will happen here and that is why those affected should set the course now. The focus is on the so-called “early retirement with a deduction”, which the legislature grants at the earliest at the age of 63 if the person has had pension insurance for 35 years. In this case, this also includes phases of illness, pregnancy, training and raising children. The deduction is 0.3 percent for each month that you retire earlier. For example, if you want to retire four years before the regular retirement age, you would get 14.4 percent less.
However, there is the possibility of compensating for this deduction with a special payment. And this year of all things would be particularly cheap. Firstly, the pension contribution rate of 18.6 percent is still at the previous year’s level. And secondly, the applicant is given the operating variable “provisional average salary”, which is used to determine the price per pension point. In other words: in 2022 you have a price advantage per pension point of a good ten percent compared to 2023. Insured persons aged 50 and over can use this advantage if they are planning to take early retirement at some point. Under 50-year-olds can also apply for a pension information from the German Pension Insurance (Form V0210) if they can prove a “legitimate interest”, which is not defined in more detail. Even if you don’t get an answer this year, the application would still be valid.
Also interesting: You get so much more money if you wait to retire
Incidentally, anyone who does not intend to retire earlier, but rather later than the statutory retirement age, can do so. Basically, everyone can work as long as he or she wants – and benefit financially from it: For example, anyone who earns 38,000 euros per year – the average in Germany – and works a year longer increases their pension by one pension point. This corresponds to around 36 euros per month. With a salary of 76,000 euros, it would be two pension points, i.e. around 72 euros. That doesn’t sound like much, but it adds up over the years. And Andrea Nahles would be happy to have a worker on the German job market for a year longer.
The FOCUS Online Guide answers all important questions about pensions on 135 pages. Plus 65 pages of forms.