Pension reforms and pensionable age Experience of Germany

Pension reforms and pensionable age Experience of Germany ILO Geneva 13 -14 September 2016 Stefan Urban Social Protection Department, ILO

The German pension system § Three pillar pension concept. First pillar: mandatory statutory (PAYG) pension. Second pillar: non-mandatory occupational pension system. Third pillar: non-mandatory private pension system. § The pension system is complemented by meanstested social assistance (tax financed) if old-age provisions from all income sources are not sufficient. 2

Drivers of the 2007 pension reform § Growing budgetary pressure § Rising life expectancy § Constant and below replacement level fertility rates § Relatively high early retirment rates § Contain contribution rates below 20 per cent (up to 2020) and below 22 per cent (up to 2030) 3

Life expectancy at age 65 (historic and projected) 30, 0 25, 0 20, 0 15, 0 10, 0 5, 0 Source: Eurostat and Federal Statistical Office of Germany 2060 2056 2052 2048 2044 2040 2036 2032 2028 2024 2020 2016 2012 2008 2004 2000 1996 1992 1988 1984 1980 1976 1972 1968 1964 1960 0, 0

Population structure by broad age groups (1960 -2060) 2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 1970 1965 1960 0 10 20 30 40 under 15 50 60 15 -64 65 or over 70 80 90 100 Source: Eurostat 5

Old-age dependency ratio Young-age dependency ratio: number of people under 20 per 100 people aged between 20 and 64; old-age dependency ratio: number of people aged 65 years or over per 100 people aged between 20 and 64; total dependency ratio: number of people under 20 years of age and people aged 65 years or over per 100 people aged between 20 and 64 years. Source: Federal Statistical Office of Germany 2015 6

Pension Reform 2007: Retirement age increase (2011 -2029) Age of Retirement Year of birth 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 Increase in retirement age (in months) 1 2 3 4 5 6 7 8 9 10 11 12 14 16 18 20 22 24 Source: Bundeszentrale für politische Bildung Year 65 65 65 66 66 66 67 Months 1 2 3 4 5 6 7 8 9 10 11 0 2 4 6 8 10 0 7

Pension Reform (adjustment) 2014: § Retirement at age 63 (with 45+ contribution years) § Mothers`pension: for every child born before 1992, two contribution years are accredited, for every child born after 1992, three contribution years are accredited. § Pensions for those with reduced earning capacitiy: fully or partially unable to work due to illness or accident. § Increased budget for rehabilitation measures § Short-term unemployment and caring for family members equal to contribution years. Source: Federal Ministry for Labour and Social Affairs 8