Questioning the Germans' "Active Pension": Bundesbank Raises Eyebrows at the Government's Plan
The Federal Government's "active pension" is questioned by the Bundesbank.
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The Bundesbank isn’t buying into the German government's rosy plans for an "active pension." In its June report, the bank points out that tying the retirement age after 2031 and the earliest retirement age to life expectancy and scrapping the early retirement option without deductions could be more effective.
The current deal between the Union and SPD permits early retirement after 45 years of service and keeps the retirement age at 67, yet aims to motivate older folks to work longer. The "active pension" is meant to help those who voluntarily work past the retirement age, with tax-free earnings up to €2,000 per month.
But the Bundesbank isn’t convinced that financial incentives are the primary drivers for older workers continuing to work. According to surveys, enjoyment of work and social aspects matter more. The economists go on to say that these incentives might just create a windfall effect, benefiting those who would have kept working anyway, without real relief for the pension system.
So, what’s the alternative? Instead of relying on pension incentives, the Bundesbank proposes measures to improve employment conditions and opportunities for older workers. Suggestions include:
- Adapting jobs to fit older workers' abilities,
- Encouraging lifelong learning and skill updating,
- Minimizing age discrimination through fostering inclusive hiring, and
- Creating age-friendly work environments.
These strategies aim to tackle the practical and structural challenges to older workers' continued employment, rather than relying solely on pension policy. In short, the Bundesbank doubts the "active pension" can keep older workers professionally active and encourages broader, work-oriented measures to support sustainable labor market participation among the elderly.
[Sources: ntv.de, dpa; Analyses of aging workforce challenges in Germany, general economic policy literature]
- The Bundesbank suggests that instead of relying on pension incentives like the "active pension," a community policy focusing on vocational training, job adaptation to fit older workers' abilities, lifelong learning, and minimizing age discrimination might be more effective in encouraging employment among the elderly.
- As the Bundesbank expresses skepticism towards the "active pension's" potential to keep older workers professionally active, they advocate for a shift in focus from pension policy to broader measures, such as improving employment conditions and fostering a business environment that is inclusive and supportive of older workers.
