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Time of India
3 days ago
- Business
- Time of India
Retirement in Europe: How long will we have to work?
Representative image (AI) On May 22, the Danish parliament passed legislation raising the retirement age. The law, approved by 81 lawmakers with 21 voting against, sets the retirement age at 70 for all citizens born after December 31, 1970. Currently, the retirement age in Denmark is 67. By 2030, it will rise to 68, and by 2035 to 69. Last year, 47-year-old Social Democratic Prime Minister Mette Frederiksen stated that she would be open to reviewing the system once the official retirement age reached 70. International comparisons show just how differently retirement ages are regulated. In some countries, people continue to work even longer than they are legally required to. Will Germany follow Denmark's lead? Germany's new government is still trying to figure out how to deal with the country's struggling statutory pensions system. At a party convention of the ruling Christian Democratic Union (CDU) in Stuttgart recently, Germany's new chancellor, Friedrich Merz, praised himself and his Social Democratic coalition partner for having "written many good things into the coalition agreement" — the key issue of how to shore up the finances of the chronically underfunded pension system, however, isn't among them. Merz warned that "the way things are today can only last for a few more years at most." For Bernd Raffelhüschen, a former government economic advisor, the Danish reform effort is worth emulating. "We should raise the retirement age to 70 quickly so we can still catch at least part of the baby boomer generation," the economist told the Augsburger Allgemeine newspaper recently, referring to the large cohort of people born at the end of the 1950s and early 60s, who are currently retiring in huge numbers. Raffelhüschen said that because 1 million Germans will be leaving the workforce every year until 2035, this would push pension contributions higher for younger generations. Beveridge vs. Bismarck Pension financing in Europe follows two main models named after their founders: the Bismarck model, based on social legislation introduced by German Chancellor Otto von Bismarck in the 19th century, and the Beveridge model, developed in the 1940s. The Beveridge system is a welfare model that provides universal coverage and is tax-funded. It was devised by British economist William Henry Beveridge, a member of the UK Liberals' parliamentary faction. The Bismarck model, on the other hand, is an insurance-based system in which both workers and employers pay into a fund. In simplified terms, it's a so-called pay-as-you-go system where the working population finances the pensions of retirees through their contributions. This is why comparing pension systems across Europe is difficult — even more so as many countries use hybrid models combining aspects of both. The specifics, often complex, also vary widely between nations. Demographics, and the benefits of working longer — or shorter Germany's Bismarck-based system is increasingly under strain due to demographic changes. As the population ages and the workforce shrinks, there are more retirees and fewer people to fund the social insurance schemes. At the same time, people are living longer due to rising life expectancy, which means they draw pensions for more years. This puts mounting pressure on pay-as-you-go pension funds, with the result that either contributions must keep rising, or pension benefits may stagnate, failing to keep up with inflation. Alternatively, the overall pension level may have to drop Of course, a shorter working life and earlier retirement are appealing for most people as they can leave work before their physical capabilities decline and use the final third of their lives for meaningful activities or more time with family. There are also economic benefits, as more leisure time creates more opportunities to spend money, thus stimulating consumer demand and the broader economy. But working longer can also have advantages. Many people feel fit and engaged well into their 60s so that they may enjoy continuing to work, pass on their knowledge, and value interaction with younger colleagues. Employers benefit from retaining experienced staff and established routines, which may also help to mitigate the skilled labor shortage in Germany. Retiring a personal decision Looking at international statistics reveals that legal retirement age rarely aligns with when people actually stop working. In most cases, people retire earlier because their bodies can't keep up, or in creative professions, because of burnout. In a few countries like New Zealand, Japan, Sweden, or Greece, people often work beyond the official retirement age. Whether they do so voluntarily is unclear. The reasons are often too personal to be captured by statistics.\ The so-called gross replacement rate — the ratio of pension benefits to the final salary — plays a major role in people's decisions. If that gap is too wide, some workers can't afford to retire. The threat of old-age poverty could be reduced if pensions were high enough to provide financial security after a long career. But that would require money that the pension system currently lacks. On the other hand, raising contribution levels too much would limit workers' ability to save privately for retirement.
Yahoo
19-04-2025
- Business
- Yahoo
Bavaria's leader: Nationwide minimum wage of €15 is 'achievable'
Markus Söder, the premier of Bavaria and one of Germany's most powerful conservative politicians, said a nationwide hourly minimum wage of €15 ($17) in 2026 is within reach. The leader of the Bavaria-only Christian Social Union (CSU) said in an interview with Augsburger Allgemeine newspaper that he would back the work of a commission looking at the issue. "The amount will be set by an independent commission, but €15 seems achievable," he said in the interview published on Saturday. Söder was a key player in recent coalition negogiations that put conservative politician Friedrich Merz on track to become chancellor in early May. He noted that the coalition agreement struck between the CDU/CSU alliance and the centre-left Social Democrats clearly states that the commission will continue to set the rate, which is currently €12.82 per hour. Still, Merz recently suggested the €15 target may not be reached until 2027.
Local Germany
14-04-2025
- Health
- Local Germany
German health insurance boss warns of 'massive' contributions hike
"If further action is not taken, a contribution tsunami is inevitable with this coalition agreement," Andreas Strom, the CEO of DAK-Gesundheit, told the Augsburger Allgemeine newspaper on Sunday. Back in January, long-term care insurance ( Pflegeversicherung ) contributions rose to 3.6 percent, while the recommended ceiling for additional health insurance contributions was raised from 1.8 percent to 2.5 percent. According to Storm, statutory health insurance is facing another increase of at least half a percent point at the end of the year. This would mean employees pay an extra 0.25 percent - or €25 on every €1,000 earned - on their health insurance contributions each month. "In conjunction with rising long-term care insurance contributions, we are then moving towards total social security contributions of 43 percent," the DAK CEO explained. "This is not only an imposition on insured employees, pensioners, and employers, it is also poison for the economy." According to Storm, the CDU/CSU and SPD - who are due to form a government in May - have failed to set out adequate funding for Germany's financially strained insurance funds. READ ALSO: How Germany's new coalition will affect your bank balance "All concrete measures mentioned in the drafts that could have ensured the goal of stable social security contributions in the short term were deleted from the final coalition agreement," he said. Advertisement In previous plans drafted by the parties, a total of €20 billion was earmarked in order to cover "non-insurance costs" for health insurance, including care for the unemployed and Covid-related backlogs. In addition, around €9 billion was earmarked for the long-term care insurance funds. These "urgently needed funds" were deleted without replacement in the final version of the coalition agreement, Strom said. With reporting by Imogen Goodman
Bloomberg
31-03-2025
- Politics
- Bloomberg
Merz Allies Urge End to German Cannabis Legalization: Augsburger
Two senior members of the German conservative CDU/CSU bloc led by Friedrich Merz are demanding a reversal of the legalization of cannabis last year by the outgoing Socialist SPD-led 'traffic light' coalition, the Augsburger Allgemeine reported, a reminder of a divisive issue that could sour talks about a new coalition government. 'We want to reverse the mistake of the 'traffic light' and ban cannabis again,' Bavarian Health Minister Joachim Herrmann told the newspaper. The southern region's Health Minister Judith Gerlach also criticized the legalization of cannabis for recreational purposes, saying the measure should be 'withdrawn quickly and completely,' the paper reported.
Yahoo
15-03-2025
- Politics
- Yahoo
German president laments 'loss of thoughtfulness' on social media
German President Frank-Walter Steinmeier has expressed concern about the consequences of the changing media landscape. There is a fundamental shift in political communication, Steinmeier told the Augsburger Allgemeine newspaper in an interview published on Saturday. "The debate is moving from the quality media to social networks - and that is profoundly changing our democracy." In traditional media, he said, there is room for differentiation, for weighing up the pros and cons. "Social media, on the other hand, works on a black-and-white principle, on a yes or no basis. This loss of thoughtfulness is worrying." "[Protecting liberal values] also means taking action online and not leaving the field to those who threaten our democracy," Steinmeier added.
