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Phasing out early retirement

Country of implementation
Germany
General short description of the innovation
The phasing out of early retirement started in 1997 and was carried out in four stages: / / Stage 1: 1997 to 2004 / / Gradual increase of the respective retirement age for particular groups on the labour market (unemployed/people in part-time employment prior to retirement, women, long-term contributors to the pension fund (35 years), severely disabled) from 60 (63) to 65. Since then each early pension had two age thresholds. A lower threshold of 60/63 years at which early retirement was still possible while accepting a reduction in the statutory pension benefit (actuarial adjustments; 0.3% for each month of early retirement (max. 18%)). An upper threshold at which (early) retirement was possible without any pension reductions. / / 1. Old-age pension for unemployed/people in part-time employment prior to retirement (01/1997 12/2001): Raising the retirement age without any deductions from 60 to 65 years. Early retirement at the age of 60 was still possible but one had to accept an actuarial deduction in the pension benefit of 0.3% for each month of retirement before reaching the age of 65. Hence the maximum deduction was 18%. / 2. Old-age pension for women (01/2000 12/2004): Raising the retirement age without any deductions from 60 to 65 years. Early retirement at the age of 60 was still possible but one had to accept an actuarial deduction in the pension benefit of 0.3% for each month of retirement before reaching the age of 65. Hence / the maximum deduction was 18%. / 3. Old-age pension for long-term contributors to the pension fund (01/2000 12/2001): Raising the retirement age without any deductions from 63 to 65 years. Early retirement at the age of 63 was still possible but one had to accept an actuarial deduction in the pension benefit of 0.3% for each month of retirement before reaching the age of 65. Hence the maximum deduction was 7.2%. / 4. Old-age pension for severely disabled (01/2001 12/2003): Raising the retirement age without any deductions from 60 to 63 years. Early retirement at the age of 60 was still possible but one had to accept an actuarial deduction in the pension benefit of 0.3% for each month of retirement before reaching the age of 63. Hence the maximum deduction was 10.8%. / / / Stage 2: 2006 to 2008 / Increasing the lower age threshold for the early pension for unemployed from 60 to 63 from 2006 to 2008. / / Introduction of a new early retirement option, namely the old-age pension for extraordinarily long-term contributors to the pension fund alongside the old-age-pension for long term contributors. The first difference is the duration of contributions. While eligibility for the old-age pension for long-term contributors requires a cumulated contribution periods of 35 years, the new pension required 45 years. Older people who possess such an extended contribution period are still allowed to retire at the age of 65 without any actuarial deductions (see stage 4; see for more details innovation 4). / / Stage 3: From 2012 onwards / / Abolition of both the old-age pension for unemployed/people in part-time employment prior to retirement and the old-age pension for women. Early retirement because of unemployment or sex was no longer possible. / / Stage 4: 2014 to 2029 / / Raising the upper threshold of both the old-age pension for long-term unemployed and the old-age pension for severely disabled in accordance with the statutory retirement age. / A) Old-age pension for long-term insured (01/2014 12/2029): Raising the retirement age without any deductions from 65 to 67 years. Early retirement at the age of 63 will be still possible but one had to accept an actuarial deduction in the pension benefit of 0.3% for each month of retirement before reaching the age of 67. Hence the maximum deduction was 14.4%. / B) Old-age pension for severely disabled (01/2015 12/2029): Raising the retirement age without any deductions from 63 to 65 years. Early retirement at the age of 60 was still possible but one had to accept an actuarial deduction in the pension benefit of 0.3% for each month of retirement before reaching the age of 65. Hence the maximum deduction was 18.0%.
Target group
Older Workers
Policy Field
  • pension
  • social
Type of Policy
  • public
Duration of the policy
1997
Scope of innovation
  • Scope: It was/is a structural innova tion within the range of options for retirement.
  • Budgets: /
  • Number of intended beneficiaries: Not applicable; t he political objective was to raise the employment participation of older people aged 55 to 64 years up to 50% and higher by increasing incentives for remaining in employment.
  • Spatial coverage: National
General description of (intended) objectives and strategies
Closing of nearly all pathways to early retirement. / / Increase work incentives for older workers.
Nature of the innovation-short-term perspective
Increase work incentives for older workers by int / roducing actuarial deductions.
Nature of the innovation-long-term perspective
This innovation clearly has/had a long-term perspective and changed the transition to retirement rather radical because early retirement / was widely abolished. As a consequence the increase in employment participation of older people aged between 55 and 64 years is highest in Germany (in comparison to the other European countries).
Type of innovation
  • retrenchment or expansion of an existing/earlier policy
New outputs
  • benefit duration (Shortening of the duration of re tirement benefits at least for those, not benefit ing from the increasing life expectancy. )
  • benefit eligibility (Retirement without any actuar ial deductions was shifted to a higher age.)
  • benefit level (In case of an early withdrawal from the labour market, pension levels were reduced by actuarial deductions. )
Intended target group
Older employees aged between 60 and 64 (66) years.
Working age population
  • main source of income: paid work
  • main source of income: social protection (please specify; e.g. unemployment benefits/disability benefits/social assistance/other benefits) (Older people who are unemployed/long-term unemployment have to receive unemployment benefits I or II f or additional two years in case that they are not willing to accept actuarial deductions on their old-age pension. According to the new rules introduced in the course of the Hartz-reforms recipients of unemployed benefit II have to accept actuarial deductions if they have fulfilled the age of 63 and if the old -age pension reduces their dependence on social benefits. )
Actors involved in policy-making/implementation and/or evaluation
  • making/implementation and/or evaluation-agency or national social insurance body
  • making/implementation and/or evaluation-central state
Clarification of the role of various actors
National legislation defines the legal framework. Access control in turn is the obligation of the German Pension Insurance. This refers to the fulfillment of actuarial eligibility criteria.
Intended output
  • benefit duration (Shortening of the duration of retirement benefits at least for those, not benefiting from the increasing life expectancy. )
  • benefit eligibility (Retirement without any actuarial deductions was shifted to a higher age. Early r etirement was still possible but with costs.)
  • benefit level (As the case may be shortening of pension benefits because of actuarial deductions. )
  • working time (Prolongation of working lives)
Did the innovation have any outcome related to job quantity?
Decline in inactivity rates of old er people aged between 55 and 64 years from 57.1% i n 2000 to 32.6% in 2013. Increase of the employment rate of older people aged between 55 and 64 years from 37 .4% in 2000 to 63.5% in 2013. No. On the cont rary: Flexible retirement age was abolished to the greatest possible extent. Increase of the labour force participation rate of older people aged between 55 and 64 years from 42.9% in 2000 to 67.4% in 2013 .Decline in unemployment rate of older people aged between 55 and 64 years from 12. 7% in 2000 to 5.8% in 2013.
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