and the '63 pension' isn't cutting it: Bundesbank calls for an end to early, discount-free retirement
Federal Bank advocates for the halting of pension's non-tax-deductible progression
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The so-called 'retirement at 63' allows contributors to retire early with no or low discounts under certain conditions. The Bundesbank ain't having it, boss. They slam this in a specialist article, demanding more to fix Germany's pension woes.
According to the Bundesbank's June Monthly Report, the government's plans for an "active pension" ain't cutting it. They want the statutory retirement age (after 2031) and the earliest possible retirement age tied to life expectancy and to scrap the early, discount-free retirement.
The coalition agreement between the Union and the SPD allows employees to retire early after 45 years of work, just like before. The agreement also sets the retirement age at 67, but it aims to encourage older people to keep working longer. An "active pension" is supposed to help: folks who hit the current retirement age and choose to work will receive their income tax-free, up to €2,000 a month.
The Economy Survey shows support for active pension modelBut the Bundesbank reckons that financial incentives aren't enough to get older workers to keep laboring. A survey showed that enjoyment of work or social aspects are more important to some people who stay in the workforce. "So, financial incentives are likely more like a windfall than a solution," the economists write.
Bundesbank - recalculate those discounts!
The Bundesbank ain't happy with the current discounts for early retirement either. They call for a recalculation, stating that the low 0.3% monthly discounts make early retirement too attractive for contributors, leading to financial burdens for the statutory pension insurance.
On the flip side, the 0.5% monthly supplements for late retirement starters are considered a bit too high by the Bundesbank based on their calculations. Currently, discounts and supplements don’t take into account the exact time of retirement.
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Propose graduated discounts and supplements
"Graduated discounts and supplements based on the distance from the statutory retirement age make more sense," the Bundesbank argues. "Fixed percentages are easier to communicate, but they ignore the impact of retirement timing."
As an example, a person born in '64 would face a 0.37% monthly discount between 63 and 64. The discount would jump to 0.42% per month for someone retiring between 66 and 67.
Furthermore, the Bundesbank suggests regularly reviewing and adjusting, as needed, the deductions and supplements for generations close to retirement, like every five years or when new population projections from the Federal Statistical Office are available.
Sources: ntv.de, good/dpa
- Pension
- Germany
- Central Bank
- Economy
- Pension Policy
Enrichment Data:The OECD Economic Surveys for Germany 2025 suggest that fiscal incentives for early retirement should be phased out so that pension benefit reductions when retiring early are at least actuarially neutral[2]. This implies an emphasis on making early retirement financially sustainable, but it doesn't mention graduated discounts and supplements specifically. For more detailed arguments from the Bundesbank about specific pension policies, including graduated discounts and supplements for early retirement, check out targeted sources or publications directly from the Bundesbank or related government agencies.
- The Bundesbank advocate for a revision of the current employment and pension policies in Germany, as the '63 pension' is not deemed sufficient to address the country's pension issues.
- In line with this, the German central bank suggests the implementation of graduated discounts and supplements for retirement ages, as opposed to fixed percentages, to encourage financial sustainability in early retirement.
