Deutsche Bank Urges Pension Age Rise as Neighbours Forced to Action

(January 16, 2012)  —  A senior economist at the largest German finance house has urged politicians to continue on their path to raise the country’s state pension age or risk a poorer future for all, as neighbouring countries have already been compelled to do so under strict austerity measures.

Dieter Bräuninger said in a research paper that the route started by Germany’s government at the start of the year to raise the pensionable age to 67 by 2030 should not be blown off course by opponents trying to score political points with the general public.

Bräuninger said: “The gradual raising of the retirement age by two years that is to be concluded by 2030 has a positive impact on Germany’s attractiveness as a business location that extends well beyond the statutory pension scheme. It is a key to continued economic growth in an ageing society.”

He said that sticking to the decision made by the government would improve the burden on corporate and private pension provision.

Bräuninger said: “A higher retirement age not only boosts economic growth on the supply side, it also promotes consumption because a longer working life raises private income and also tends to reduce the need to save for retirement.”

He said that a higher retirement age could reduce the growing scarcity of labour and slow the costly rise in the number of pensioners, which would improve the prospects of prosperity being broadly distributed and makes pension financing more sustainable.

Elsewhere in the Eurozone, countries in a less-healthy financial state have had no choice but to implement a higher pension age. In Italy and Spain the retirement age is set to be raised by two years to 67. These changes will already be implemented in 2026 in Italy and in 2027 in Spain. Ireland has even paved the way for a retirement age of 68. And in Greece the retirement age will rise in line with life expectancy by 2021.

In the UK, Prime Minister David Cameron recently drew anger from unions and was forced to delay the increase in the age which women in the UK would be able to retire. This was mainly due to most women not having accrued enough contributions to be able to draw a fair pension, due to having accrued a lower number of years worked.

Bräuninger said opposition politicians were calling for the raising of the retirement age to be scrapped or at least for the start of the transition to be postponed.

He said: “The latter would be tantamount to scrapping the entire policy of raising the retirement age to 67, especially as there will be an increase in the number of older workers being affected imminently and thus in the potential opposition within the general population in the coming years.”

The Deutsche Bank economist dismissed theories that extending working lives would put the younger generation out of work.

He then compared to the EU as whole; Germany not only boasted an above-average participation rate for 55-64-year-olds, but also the lowest youth unemployment.