„Actuarially Fair” Reductions in Early Retirees’ Pension Benefits: A Systematic Study of Neutrality in Pension Financing and in the Burdens and Incentives for Members of the Statutory Pension Scheme

However, the statutory old age pension for men would have to be lowered by up to 1.6 additional percentage points – depending on the retirement date – to avoid burdening the expenditure side of Germany’s statutory pension scheme. Yet even such a cut would not prevent the permanent burdening of present contributors to the pay as-you-go scheme, because early retirement would mean more pensioners being supported by fewer contributors. Up to now, policymakers have worked on the (fictitious) basis that the state pension was a full replacement for the income previously earned, and additional earnings were therefore penalized. From 2023, however, the full old-age pension can be drawn unaffected by ongoing income from gainful employment. Thus early retirees, too, will be able to earn unlimited additional income without affecting their pensions, and this will more than compensate for what they lose as a result of their reduced pension entitlement. The federal government should therefore waste no time in assessing the likely extent of premature pension claims in the future in order to prevent early retirees enjoying a longer working life at the expense of contributors.