European Trade Union Institute, ETUI.

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11 January 2018

Germany: retirement plans adapted to one’s career criticised

An Act that should facilitate a smooth transition from an active working life into retirement entered fully into effect, in Germany in July 2017. Trade unions have criticised the ideas behind the Act, because the legislator’s main objective was not a flexible transition, but mainly the prolonging of the working life after retirement. However, recent statements from the OECD suggest that it might be mostly used as an early retirement scheme.

On the 21st of October 2016, the German parliament passed an Act to make the transition from work to retirement more flexible. The Act also sought an improvement of prevention and rehabilitation in working life (Gesetz zur Flexibilisierung des Übergangs vom Erwerbsleben in den Ruhestand und zur Stärkung von Prävention und Rehabilitation im Erwerbsleben). The legislation also named the Flexirentengesetz, came partly into force on 1 January 2017 and was fully enacted from 1 July 2017 on.

The objective of a working group of members of parliament that took the initiative was to create a smoother transition from working life into retirement, while also making it more attractive to continue work after the statutory pension age. Therefore, it would now be more profitable to carry out paid work as a pensioner. 

The trade union’s reaction was critical when the Act was passed. The DGB had the impression that the Act was not meant to facilitate partial early retirement, but that the main objective was to push for a longer working life after retirement. The unions made counter proposals which would enable workers to have phased early retirement from the age of 60 years, onwards,  as a method to slowly slide out of a working life.

In December 2017, the OECD criticised the proposals, denouncing the fact that pension benefits increase rather little in case of continued work. According to the organisation, the Act does not serve the continuation of one’s working life, but leads to a more frequent use of early retirement.

An OECD-spokesperson stated that it is not attractive at all for pensioners to work after retirement and recommended higher financial incentives that could diminish the use of retirement at the statutory pension age. The OECD referred to a study (from May 2017), which concludes that the flexibility reforms enacted so far have failed to increase old-age labour supply and delineate several alternative options to achieve this aim.

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