The Bundesbank's Call for Revamping Early Retirement Benefits
Reduced early retirement deductions, according to Bundesbank, are insufficient. - Early Retirement Discounts Offered by the Bundesbank Inadequate
The Bundesbank ain't mincing words: they believe the government's pension plans need a damn good revamp. In their June monthly report, the Bank criticizes the government for not linking statutory retirement age, earliest possible retirement age, and life expectancy. They also think it's crucial to abolish early retirement without penalties.
The Unión and SPD have agreed, in the coalition agreement, to allow employees to retire early after 45 years of professional activity. While keeping the retirement age at 67 the same, they want to implement an "active pension," which means those who work past the statutory retirement age can earn up to 2,000 euros tax-free per month.
But the Bundesbank ain't buying it. Their economists argue that most people in higher age continue working for reasons other than financial gain, like enjoying their jobs or needing the social aspect. Financial incentives, in their opinion, might just cause folks to grab the easy money without helping the pension system as a whole.
Apart from criticizing the financial incentives, the Bundesbank claims the current penalties for early retirement are too low and cause burdens on the statutory pension insurance. They also believe that the current 0.5 percent monthly pension supplement for those starting late is a bit too high.
To address these issues, the Bundesbank suggests a graduated system for deductions and supplements based on the distance from the statutory retirement age. For example, they propose a 0.37 percent monthly deduction for individuals retiring at 63 and 64, and a 0.42 percent deduction for individuals retiring between 66 and 67.
Moreover, they advocate for regular reviews and adjustments of the deductions and supplements for cohorts near retirement. This review can happen every five years or when new population forecasts are available from the Federal Statistical Office.
Check Abbreviations:
- Bundesbank - German Federal Bank
- Active Pension - A pension scheme that allows employees to continue working past the statutory retirement age and receive tax-free salary up to a certain limit.
- Federal Government - The German government
- Union - Christian Democratic Union, a major political party in Germany
- SPD - Social Democratic Party, another major political party in Germany
- Coalition Agreement - The agreement between the Unión and SPD following Germany's federal elections, outlining their plan of action for the next term.
Source
- The Bundesbank's proposal for a graduated system of deductions and supplements, based on the distance from the statutory retirement age, aims to address the current financial burden caused by early retirement on the statutory pension insurance.
- In the realm of general-news, the ongoing debate between the Bundesbank and the Unión and SPD centers around the implementation of an active pension and the associated financial incentives, with the Bundesbank arguing against such incentives and instead advocating for regular reviews and adjustments of deductions and supplements for cohorts near retirement.
