bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

authorLocations

authors

paywallTypes

corrections

sponsorType

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

Jonathan Braude

In Britain, the government is slowly raising the age of retirement for women. Eventually, they will reach pensionable age, as men already do, at 65.

 The change is designed to fit in with European anti-discrimination laws, but the move has positive economic effects. It increases the pool of contributors to the state pension fund and reduces the number of pensioners the fund supports.

 So impressive are the results, that the private National Association of Pension Funds is calling on the government to raise the age of retirement for men and women to 70.

 As people live longer, runs the argument, there is less reason for a dwindling pool of younger workers to be forced to pay ever larger sums to support a generation of perfectly healthy elderly individuals on state pensions.

 Merrill Lynch, the US investment bank, has gone one further and calculated the effects of raising the retirement age to 69 across Europe.

 If European governments do nothing, the bank warns in a report published last week, pension contributions will have to double within 40 years from 13.76 per cent of average salaries in 1990 to 25.86 per cent in 2030.

 Raising the pensionable age would involve a rise in pension contributions to 'only' 17.17 per cent of average salaries by 2030.

 Yet in Germany, where the population is ageing faster than almost any other country in Europe, the government is arguing for a reduction in the retirement age from 65 to 60.

 The claim is that early retirement would open the job market for younger people, help cut unemployment and so increase the pool of people able to pay for their parents' and grandparents' pensions. More pensioners make a society look caring; more aggressive young men on the dole make a bad impression.

 This maverick position is not because the government of Chancellor Gerhard Schroeder has neither heard nor understood the warnings from doomsayers such as Merrill Lynch.

 Only a week or two ago, Mr Schroeder (who likes to portray himself as a modernising, centre-left socialist in the mould of Britain's Tony Blair ), was in fighting form, attacking calls for a lower pensionable age as 'unfinanceable'.

 But a few days later, to cat-calls from the employers' organisations, scorn from economists and scepticism from some of the labour unions, the chancellor was back, supporting the opposing view.

 The U-turn was politically driven. After a series of humiliating defeats in state elections, Germany's Social-Democrat-led federal government is veering to the left. It is too late to influence the voter, although the elections proved the unpopularity of the Social Democrats' austerity drive. But the powerful traditionalist wing of the Social Democratic Party has more power over the chancellor than mere voters. Mr Schroeder now has to placate his own left wing.

 Hence his support for the plan to reduce the pensionable age to 60, concocted by Employment Minister Walter Riester and metalworkers' union IG Metal.

 Mr Riester proposes setting up a special employers' and employees' contributory fund to cover the cost of the extra five years of retirement, estimated at between 45,000 deutschemarks (about HK$194,566) and 100,000 marks per pensioner.

 That way he can avoid putting an extra burden on the existing pension fund.

 The calculations are largely spurious. In some cases, no doubt, a retiree would be replaced by a thrusting young worker, on lower pay and thus requiring lower employer's contributions to the state pension fund.

 The government would save on unemployment benefit and the jobless index would decline at last. At a time when unemployment is stubbornly stuck at around 10 per cent (higher in the former Communist east), any reduction in the jobless figures would be politically welcome.

 But in Germany, as in some other EU countries, pensions are not only higher than unemployment benefits, they are also longer-lasting. Dole payments are cut and replaced by much lower levels of social security benefits after a certain period of unemployment.

 A healthy pensioner can carry on receiving indexed-linked payments for 30 years, starting from up to 90 per cent of his last pay-packet. Adding another five years to his retirement makes little sense.

 And while IG Metal is crowing, other unions fear the scheme would accelerate the massive job cuts already in the pipeline in every sector from banking to electricity generation.

 Employers would be delighted to rely on faster natural wastage and early retirement to provide relatively painless restructuring programmes.

 Meanwhile, women's groups fear the move will discriminate against mothers who take time out to have children.

 Their members would face years of extra contributions without ever working the 35 years needed to qualify for a full pension at 60.

 Mr Riester says it is up to the employers and unions to work out the details of the scheme between them, not for the government to force them into it.

 But the political direction is clear. While Germany's competitors are looking at ways to cut costs and preserve social provisions on a shoestring, Mr Schroeder's modernising drive has gone into reverse.

 Germany has not yet found its Margaret Thatcher. And Gerhard Schroeder is no Tony Blair.



Germany swimming against tide of change over retirement age