German reform plan: higher retirement age and a new state fund

An expert commission appointed by the German government is proposing an ambitious package of changes to the country's pension system – part of a wider discussion on how the "EU retirement age" can remain sustainable in the face of an aging population. The ideas include a higher retirement age, restricting early retirement, and creating a state pension fund modeled after the Swedish system.

According to the concept, Germany could gradually increase the retirement age beyond the currently planned level. Current legislation provides for the standard retirement age to reach 67 by the end of this decade. The commission proposes a new mechanism – every 10 years, depending on life expectancy, the age would be gradually increased so that in the long term it would reach 70 years around 2092.

One of the key proposals is to end the option for early retirement at 63 without a reduction in pension payments. The goal is to limit pressure on the system and encourage longer participation in the labor market – a problem also faced by other EU countries when discussing the general framework for "EU retirement age".

The second important measure is the creation of a state pension fund, inspired by the Swedish model. The idea is for a portion of the pension contributions of workers and their employers to be directed into this fund and invested in financial assets – stocks, bonds, and other instruments. The accumulated returns would be used to support the payment of future pensions.

According to the preliminary plan, investments through the new fund should help to "stabilize pension levels" and create conditions for them to begin "rising from 2040 onwards". The combination of longer employment, a higher retirement age, and additional investment returns is seen as a way to ensure the long-term sustainability of the system.

The commission's proposals are set to be discussed by the government and parliament in Berlin and are likely to spark a broad public debate. They fit into the trend of many countries seeking a new balance between a higher "EU retirement age", fair pensions, and sustainable public finances in the context of demographic changes in Europe.