1. Home
  2. Studies
  3. „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
Jochen Pimpertz IW-Trends No. 4 2. January 2023 „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

Calls for the reduction in state pension benefits for early retirees to reflect real insurance risks imply that early retirement need not involve any additional costs.

Download PDF
A Systematic Study of Neutrality in Pension Financing and in the Burdens and Incentives for Members of the Statutory Pension Scheme
Jochen Pimpertz IW-Trends No. 4 2. January 2023

„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

German Economic Institute (IW) German Economic Institute (IW)

Calls for the reduction in state pension benefits for early retirees to reflect real insurance risks imply that early retirement need not involve any additional costs.

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.

Content element with id 11727
Download PDF
A Systematic Study of Neutrality in Pension Financing and in the Burdens and Incentives for Members of the Statutory Pension Scheme
Jochen Pimpertz IW-Trends No. 4 2. January 2023

„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

German Economic Institute (IW) German Economic Institute (IW)

More on the topic

Read the article
Stethoskop auf verschiedenen Euro-Banknoten liegend. Medizinische Kosten, Versicherung, Vermögen, Gesundheit, Bildungskonzept.
Jochen Pimpertz IW-Trends No. 4 17. December 2023

Expenditures and Revenues in Germany’s Statutory Health Insurance

Almost annually recurring deficits in Germany’s statutory health insurance system have led to a steady rise in the contribution rate, a percentage of earned income.

IW

Read the article
Matthias Diermeier / Ruth Maria Schüler IW-Trends No. 4 13. November 2023

Changing Germany's Statutory Pension Insurance: An Empirical Study of Popular Aversion to Reforms

The demographic transition is putting the German statutory pension insurance system under enormous pressure to reform. Despite widespread concern, no reform of the adjustment mechanisms incorporated into the pension system meets with the approval of a majority ...

IW

More about this topic

Content element with id 8880 Content element with id 9713