Germany is discussing retirement at 63. But a look abroad shows that the rigid view of the age limit obscures the view of the main problem. Why is that and what could happen to the Germans now.
Anyone who has ever vacationed in the USA or Japan knows these pictures: Very old people work in parking lots, in supermarkets. They clean, advise or collect. Working pensioners are omnipresent there in everyday life. In the land of the rising sun, every fourth pensioner between the ages of 65 and 69 still has one or more jobs.
Very few do it because they want to, but because the pension alone is not enough. Japan shoots more than a third of its income into the social security system, but given the demographic situation, not enough for everyone to receive enough pension to be able to live on it comfortably. And so every fourth person has to earn money.
The Japanese government recently raised the statutory retirement age to 65. It should actually continue to rise, but that is currently not politically feasible. And if the law doesn’t work, then it’s different. And so the Japanese government is using incentives and sometimes harsh pressure to encourage as many people as possible to retire later.
So far, more than 50,000 companies have made it possible to employ over 70-year-olds. With many, you can still toil with over 80. Anyone who has put enough aside and wants to retire at 65 can continue to do so. But the employers make attractive offers to everyone else so that the employees can hang on for a few more years.
This has long been possible in Germany – everyone can work as long as they want and receive a higher pension for every extra year until their death. But there is one crucial difference: companies in this country are not allowed to simply cut salaries. In Japan, a difficult situation for older people arises from the fact that the state implemented pensions at 65, but companies stuck to company pensions at 60.
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Millions of people are therefore faced with the choice of having to bridge a gap of five years or accepting a salary reduction of an average of 40 percent at 60. So many old people in Japan get far less before they retire than they did up to the age of 59 – the smaller the gap for continued employment beyond the age of 65. And all the more attractive for employers to continue employing them.
Basically, looking at Japan is very interesting for us Germans, because our demographic situation is approaching that there. In the current discussion about raising the legal and, above all, real retirement age, Federal Labor Minister Hubertus Heil claims that people in Germany have to work longer hours than the European average: “Increasing the retirement age to 69, 70 or 75 is wrong and unfair, because That would mean a real reduction in pensions for many people who simply cannot work that long,” Heil said recently, adding: The statutory retirement age of 67 from 2031 is already very high in international comparison.
So Germany a true pension hell? In fact, the retirement age in Germany is at the upper end, but not higher than in most European countries. And: Spain, for example, will even have retirement age at 67 in 2027, not just in 2031 like Germany. In Ireland, from 2028 it is working until 68. Denmark is increasing the retirement age to 69 by 2035. On average across all OECD countries, the statutory retirement age is 64.2 years, i.e. below the current German age of 65 years and 11 months.
But this number is on paper, what matters is how long people actually work – see Japan. What would we Germans gain from retiring at 67, but every fourth person had to earn something extra? On average across OECD countries, men work until the age of 63.8 and women until the age of 62.4. Germany, at just under 64, is way above that. In Portugal, the actual retirement age for men is particularly high at 68.5 years, similarly in Iceland at 68.1 years. In Latvia, Estonia, South Korea and Turkey, too, people work longer than the law stipulates. And just in Japan.
A look at the land of the rising sun shows that the decisive question should not be when we will retire. But how many people will still have to work in the future after retirement because their pension is not enough. If more people work longer than the law allows, this is an indication that many cannot adequately cover their living expenses from the statutory pension. So if you want to compare pension systems, you should look at the real retirement age – it is the best indicator.
A comparison of pension amounts is difficult because the systems are very different and the variables are numerous. The Organization for Economic Co-operation and Development (OECD) compared net replacement rates in 2021. This briefly describes the relationship between pension and wages that people have earned in working life.
This value should also be treated with caution because it says nothing, for example, about the prosperity of the people in the countries compared. But it is good as an indicator: the average across OECD countries is 62.4 percent, and in Germany it is 52.9 percent, well below that. Within Europe, only Switzerland, Ireland, Poland, Estonia and Lithuania are among them.
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The article “Germany as pension hell? A look at Japan shows what’s still in store for us” comes from WirtschaftsKurier.