ifo Dresden Favors Linking Retirement Age to Life Expectancy

The ifo Institute’s Dresden Branch has spoken out in favor of linking the retirement age to rising life expectancy. “Some of our neighboring countries have already decided to do this, such as the Netherlands, Sweden, and Finland,” says ifo pension expert Joachim Ragnitz. The following rule applies in the Netherlands: if people live three years longer, they have to work two years longer and get one more year of pension. This would mean the ratio of pensioners to the working population remains stable at around 40 percent after 2040 rather than rising to almost 50 percent, as currently forecast.

It would also be worth considering no longer linking pension increases to wage increases, as has been the case to date, but to the inflation rate, which is generally lower. This would slow down the increase in pension expenditure. There are often calls to include the self-employed and civil servants in the contribution payment, but the ifo researchers argue that this does not make sense. This solution would relieve the pension funds in the short term, but over the long term, the payouts for these groups would be considerably higher, partly because they have a longer life expectancy.