Germany approves pension reform to incentivize later retirement
By Maria Martinez
BERLIN, Sept 4 (Reuters) -Germany's cabinet approved a pension reform on Wednesday which includes incentives to keep workers in the labour market for longer as part of measures to foster growth in the euro zone's largest economy.
The move comes as governments across Europe try to address worker shortages and ease the burden on their pension systems as populations age.
In 2030, Germany's working population will probably have decreased by 6.3 million people from 2010, according to an interior ministry demography report. This will push down GDP per person because there will be fewer workers for each retiree.
Retirement age, childcare provision and immigration policies were all political decisions which could influence the extent to which a low birthrate affects the economy, Holger Schmieding, chief economist at Berenberg told Reuters.
In Germany, the statutory retirement age is scheduled to rise to 67 in 2031 from 65.8 currently.
A further increase in the retirement age was highly controversial among Germany's coalition partners, so the only option was to make it voluntary by giving incentives for people to work longer if they feel healthy and capable.
Under the reform, anyone who postpones the start of their pension and is employed for at least twelve months will receive a one-off payment equivalent to the lost pension payments.
Furthermore, employer contributions to pension and unemployment insurance will be paid directly to employees who decide to continue working, in addition to their salaries. This would correspond to a gross wage increase of 10.6%.
Labour market researcher Enzo Weber told Reuters that if the labour market participation of people aged over 60 years was raised to the same rate as those five years younger, Germany could have 2.5 million additional workers.
"That's clearly a big potential," Weber said.
Reporting by Maria Martinez and Holger Hansen, Editing by Madeline Chambers and Christina Fincher
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