Bundesbank Slams Federal Government for Insufficient "Active Pension" Plan
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Reduced Pension Deductions for Early Retirement Invalidated by Bundesbank as Insufficient - Reduced Discounts on Premature Retirement Offered Inadequately by Bundesbank.
The Bundesbank, Germany's central bank, has slammed the federal government's plans for an "active pension," deeming them inadequate. In their June monthly report, the Bundesbank argues that the government's plans for encouraging longer working lives are insufficient, stating that early retirement without deductions should be eliminated[1].
The current arrangement, as stated in the coalition agreement between the Union and SPD, allows employees to retire early at 63 after 45 years of service, with the retirement age remaining at 67. To encourage older workers to stay in the workforce, the government plans to introduce an "active pension" - those who reach the statutory retirement age but continue working voluntarily will receive their income tax-free up to 2,000 euros per month[1].
However, the Bundesbank argues that financial incentives are unlikely to be a primary motivator for older workers to continue working, with surveys suggesting that enjoyment of work and social aspects play a more significant role[1]. As a result, the proposed active pension may not relieve pressure on the pension system as a whole.
The Bundesbank also criticizes the current deductions for early retirement as being too low and causing financial burdens for the statutory pension insurance. Conversely, they argue that supplements for those who delay retirement are currently too high[1].
To address these issues, the Bundesbank proposes a system of graduated deductions and supplements based on the distance to the statutory retirement age. They also suggest that these deductions and supplements should be regularly reviewed and adjusted for those close to retirement[1].
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German Federal BankReform ProposalEarly RetirementActive PensionFederal GovernmentFrankfurt am MainSocial Democratic Party (SPD)Coalition Agreement
[1] Enrichment Data: According to the Bundesbank’s June 2025 Monthly Report, the institution's proposed reforms for early retirement deductions and active pension policies aim to make adjustments more actuarially fair and neutral. The proposals suggest linking retirement timing decisions to demographic developments and fiscal sustainability, encouraging individuals to align their retirement decisions with economic and demographic realities. The Bundesbank's recommendations include adjusting pension benefit reductions for early retirement, incentivizing later retirement through structured benefit increases, and linking retirement timing decisions to demographic developments and fiscal sustainability. Overall, the Bundesbank's proposals aim at a more balanced approach where pension deductions for early retirement and bonuses for delayed retirement are fair, sustainable, and encourage decision-making that supports the overall sustainability of the pension system in the face of demographic change. No specific numeric details or legislative drafts have been presented in the Bundesbank’s recent public communications, but the general direction is clear: reform early retirement deductions to be actuarially neutral and strengthen incentives for people to work longer before drawing pensions. These reforms form part of ongoing dialogue on structural reforms necessary for the German pension system to remain financially stable without compromising social protection.
- The Bundesbank, in its June monthly report, has proposed a system of graduated deductions and supplements for retirement, aiming to make adjustments more actuarially fair and neutral, as part of ongoing discussions for structural reforms in Germany's pension system.
- In the same report, the Bundesbank criticized the current finance policy regarding early retirement deductions, suggesting that they are too low and cause financial burdens for the statutory pension insurance, and the proposed active pension may not relieve pressure on the pension system as a whole. The Bank also recommended that these deductions and supplements should be regularly reviewed and adjusted for those close to retirement, with enjoyment of work and social aspects being more significant motivators for older workers to continue working beyond the retirement age.
