The reality of Germany’s aging pension system being unsustainable is a well-known issue, but the proposal to raise the retirement age to 70 has ignited protests and could destabilize the government. Since becoming Prime Minister in May, Friedrich Merz has mostly steered clear of the contentious topic of demographic shifts, choosing instead to offer incentives like tax cuts to encourage older citizens to remain in the workforce longer.
Conversely, his economic minister, Catherine Reihee, who has a background in energy and grew up in the eastern part of the country, has been vocal this summer about the need to address the aging population. She recently shared with the Frankfurter Allgemeine Zeitung that, considering demographic changes and increased life expectancy, it’s becoming essential for people to work longer. “We must, indeed, work longer,” she stated.
Reihee pointed out that a think tank suggested two decades ago that the minimum pension age should reach 70 by 2025. However, most Germans are likely to spend only two-thirds of their lives employed. Meanwhile, Merz appears to be treading carefully, factoring in the concerns voiced by the Social Democrats (SPD).
The SPD isn’t staying silent. They have a vested interest regarding pension reforms, especially after their previous coalition government disbanded last November. SPD’s General Secretary, Tim Klüssendorf, mentioned that while raising the retirement age might work, it could effectively mean reducing pensions. He suggested that enhancing workforce participation, especially among women, through expanded childcare and flexible work options could alleviate some pressure on the pension system.
Many economists advocate for integrating more individuals, including immigrants, into the workforce to help stabilize the pension framework. Some analysts recommend aligning the retirement age with average life expectancy, similar to practices in the Netherlands.
Labor Minister Bärbel Bas proposed some tax hikes and new requirements for freelancers and lawmakers to contribute to the pension scheme, although this has raised red flags among Conservative members. The demographic trends tell a stark story: in the mid-90s, four workers contributed to every pensioner; by 2020, this ratio shifted to three, and projections suggest it will drop to 2.4 by 2035.
Interestingly, Germany already has a higher labor market participation rate among those aged 65 to 69 compared to the EU average—21.2% versus 16%. As for retirement, the average age at which Germans started receiving pensions was 64.7 in 2024.
Other countries, like Denmark, recently took steps to raise their retirement age to 70 by 2040, noting they hold a favorable position in Europe. Back in the 2000s, when Germany faced significant unemployment, the SPD made substantial reforms to the labor market, gradually raising the retirement age as part of broader changes.
CDU General Secretary Carsten Linnemann believes that such decisive action is needed again and hopes the current economic climate will motivate necessary reforms. However, Merz, who turns 70 this November, remarked that Germany’s old work ethic isn’t sufficient to sustain the welfare system. He acknowledged earlier that we can’t maintain the country’s prosperity with a shorter workweek and an emphasis on work-life balance.
Last month, he attempted to clarify his position, suggesting instead that it’s about raising the national average work rate, not merely pushing Germans to work more. His coalition has promised to maintain pension levels at 48% of average lifetime income through 2031, but critics argue there’s no viable plan in place to ensure the system endures for future generations.
