Europe Retirement Age: Denmark Raises Age to 70, Germany Considers Reforms
Denmark has recently approved legislation to increase the retirement age, prompting discussions and potential reforms across Europe, particularly in Germany.
Denmark's New Retirement Law
On May 22nd, the Danish parliament passed a law setting the retirement age at 70 for citizens born after December 31, 1970. This decision, supported by a majority of lawmakers, signifies a significant shift in the country's approach to retirement planning.
Germany's Pension System Under Scrutiny
Germany's government is grappling with challenges within its statutory pension system. Friedrich Merz, Germany's new chancellor, acknowledged the need for reform at a CDU party convention in Stuttgart. The current system is facing increasing pressure due to demographic changes.
The Need for Reform
Bernd Raffelhüschen, a former government economic advisor, advocates for Germany to emulate Denmark's reform efforts. He suggests raising the retirement age to 70 to alleviate the strain caused by the retiring baby boomer generation, with 1 million Germans expected to leave the workforce annually until 2035.
Beveridge vs. Bismarck
European pension systems are primarily based on two models: the Bismarck model, common in Germany, and the Beveridge model. The Bismarck model relies on contributions from workers and employers, while the Beveridge model is tax-funded. Demographic shifts are straining Germany's Bismarck-based system.
Retiring: A Personal Decision
While raising the retirement age is under consideration, retirement decisions remain deeply personal. Factors such as physical capabilities, financial security, and personal preferences all play a role. The gross replacement rate significantly influences retirement choices.