Tremors over pension reform: What makes the “pension at 63” so explosive

Twelve years ago, the Merkel government introduced the “pension at 63”. At the beginning of July, the party leaders of the CDU/CSU and SPD agreed to abolish this controversial special regulation for insured persons with 45 contribution years in the course of the planned major pension reform. But now this is at the center of a major political dispute, which could decide not only the future of pension reform, but that of the entire coalition. The “Bild” newspaper reported on Tuesday, citing coalition circles, in the parliamentary group of the CDU and CSU will be discussed a new compromise proposal. Accordingly, the deduction-free pension should be officially maintained after 45 contribution years. However, parenting or nursing periods, for example, should not be taken into account more or less in the future. This could significantly increase the number of working years for many employees who want to retire early on, wrote the “Bild”. What exactly is the “pension at 63”? In the law, it operates as an “old-age pension for particularly long-term insured persons”, in political language also as a deduction-free early pension after 45 years of contribution. As this name suggests, it differs from other old-age pensions in two ways: On the one hand, you can retire up to two years before the regular age limit. The latter increases to 67 years by 2031, the former only to 65 years. On the other hand, the beneficiaries do not have to accept any discounts for receiving their pension early. But all this is only possible if you have 45 years of “waiting time”, as the law says. Why are the 45 years needed for this called “waiting time”? Politicians often speak of “heavy scoundrels”. However, the law applies different criteria. Contribution years do not only include periods in which employees have worked and paid social contributions. Other times contribute to the required 45 years. This includes minor employment, i.e. mini-jobs, but also civil and military service. Likewise, child-rearing periods that qualify for the maternal pension are included. And this is true even in times of unemployment. How fair is this regulation? It fits badly with the “equivalence principle” of the statutory pension. After that, each contribution euro paid should be worth the same. This alone ensures that insured persons with 45 contribution years receive higher pensions than those with 35 or 40 years. In this respect, it would be fair if all insured people have to accept the same discounts if they want to receive a pension earlier, i.e. longer. The early pension free of charge contradicts this. Insured persons with 45 contribution years thus also receive more pension per paid euro than those with 44 or less years. How many people receive the tee-free early pension? In total, around three million insured persons have used this type of pension since 2014, around a quarter of a million per year. Last year, 262,000 insured were added. That was 28 percent of all new retirees. How great is the advantage of the so-called tee-off freedom? If insured persons with less than 45 years of contributions stop early, then they must deduct deductions from their monthly pension acquired until then. That's 0.3 percent for every month you go earlier, so for two years, 7.2 percent. Conversely, this is the advantage that the insured gain by a deduction-free early pension – it is under the same conditions correspondingly higher. Is this more accurate in euros and cents? To simplify, the case with the age limits of 65 and 67 years is again considered. For an insured person who has always worked at the average wage, it looks like this: After 45 years, his pension entitlement is 1913 euros per month. If he is then already 67, he will definitely receive it in full. If he is then only 65, this is only possible with the tee-free early pension. Without this, he would have the following options: he continues working for two years, i.e. 47 years in total; This increases his pension to 1998 euros, which he then receives with 67 unabridged. But if he still stops at 65, the 1913 euros will be reduced by 7.2 percent. That is 138 euros less, 1775 euros remain. The same deduction has already been accepted by a sixty-five-year-old colleague, who has earned a claim to 1913 euros pension in 43 contribution years. How expensive is the special scheme for the general public? The costs shall be borne by the contributors. The amount cannot be specified exactly, but around ten billion euros a year are considered plausible. The pension insurance carries the deduction-free early pension as a non-insurance benefit. In 2025, it estimated the total cost of early retirement pensions, for which no full discounts are applied, at 13.3 billion euros per year. The extent to which abolition relieves the coffers depends on assumptions: If all of the currently potential beneficiaries were to continue working up to the regular age limit, an overall effect of up to 20 billion euros per year is conceivable through lower expenditure and higher contribution income. Then everyone stops with discounts earlier, the effect falls to a few billion euros. Why is the cost of early retirement so important now? The concept of the Pensions Commission envisages the introduction of a new compulsory capital pension, the returns of which primarily improve the pensions of current contributors. This requires a new, additional pension contribution of two percent of gross wages. This makes discharge elsewhere all the more urgent. If the end of the deduction-free early pension relieves the pension fund by ten billion euros annually, this alone dampens the increase in the regular pension contribution by about half a point. How does the burden on contributors develop? So far, the pension contribution is 18.6 percent..