I will confess to not normally being a fan of the policies proposed by the Bundesbank. Ordoliberalism has its attractions and ordomonetarism many fewer - but the Bundesbank is correct here in their statement that the German pension age should rise. For the state pension is not and should not be the money used to finance one's retirement. Instead it should be the social insurance that you will outlive the money that you rationally saved for said retirement. Thus the pension age should rise substantially:
Elderly Germans may have to keep working until the age of 69 if a Bundesbank proposal is adopted.
It says Berlin should consider raising the retirement age to that level by 2060, from around 65 at the moment.
No, the BBC has got that wrong. The statement is not that people must keep working. Rather, it's that they shouldn't get a state pension until that age.
The Bundesbank said the government’s current plans that include raising the retirement age to 67 by 2030 and increasing contributions don’t account for the fact that the ratio of retirees to contributors is set to widen further. Increasing life expectancy means retirees will draw from pension funds for a longer period of time, and a generation of baby boomers that retires post-2030 means there will be more pensioners to take care of per working adult, while birth rates remain low, according to the report.
There is no easy nor cute solution here either. It is true that people are living longer, there are fewer young working people per oldster and thus there just isn't that simple solution. Either pensioners get less, workers pay more or pensioners get paid for a shorter period of time. None are attractive off the bat but that last is the best solution:
The state pension system is in good financial health currently but will come under pressure in coming decades as baby-boomers retire and there are fewer younger workers to replace them, the Bundesbank said in a report.
The retirement age for Germans is scheduled to rise gradually to 67 by 2030.
The Bundesbank estimates this increase will not be enough to allow the German government to keep state pensions at the level it targets - at least 43 percent of the average income, from the 2050s due to people living longer.
To avoid raising contributions too far or letting pension levels sink, the government should consider increasing the retirement age to 69 by 2060, the central bank said.
There we are, the Bundesbank agrees with me so obviously they are correct.
Back when Bismark started the whole state pension thing in 1889 the pension was paid at a starting age of 70. Which was, for those who lived through the child mortality of the time, about the age they might expect to live to. Thus pensions were only being paid to those who lived longer than normal. And this accords with what a good state pension scheme would be.
It is rational for us to save for our retirements. But it is only rational for us to save to a level to cover how long we think we might live. And that is, of course, the average age to which people live in our time and place. So, today, somewhere between 75 and 80. But obviously, we also want to make sure that we are provided for if we live beyond that age - outlive our rational savings that is. And that's what the social insurance system of a state pension really should be - insurance against living long enough to have exhausted our rational savings. And thus the pension age should be, everywhere, rising from where it currently is. Even better, doing this would entirely solve all of the solvency problems of absolutely every rich world state pension system. The Bundesbank has this one right.
