Myth 1: Life expectancy is rising—so the retirement age must rise as well
The fact is: Overalllife expectancy is rising. But to be able to work, you not only have to be alive, but also healthy. That’s why “health-adjusted life expectancy” is more important than life expectancy alone. Demographers use this term to describe the length of time lived without physical or mental limitations. Health-adjusted life expectancy is far lower than general life expectancy. In Germany, it stands at around 65 years —for newborns, mind you!
Many people are therefore unable to work any longer simply because, statistically speaking, they are getting older. Even today, many do not make it to the standard retirement age. If the statutory retirement age continues to rise, this will mean nothing less than a reduction in pensions for millions of Germans: they will then retire early with reduced benefits.
Another problem: It is often difficultfor older people to stay in the workforce or find a new job. The unemployment rate among those over 50 is higher than average.
Calls for a longer working life usually come from highly paid people with low physical demands—and from employers who hope that a higher standard retirement age will keep pension contributions as low as possible.
Myth 2: The government pays billions into the pension fund—so pensions are too expensive
The fact is: It comes as little surprisethat tax revenue also flows into the pension fund. After all, the pension fund also fulfills responsibilities on behalf of society as a whole. This means it pays for benefits that are not offset by contribution revenue.
These benefits are being expanded more and more. A current example: the mothers’ pension. It would make sense to pay for such benefits with tax revenue. Instead, they place a burden on the pension insurance system and thus, first and foremost , on the contributors. Federal subsidies to the pension insurance system are too low rather than too high.
Myth 3: The elderly cash in—the young foot the bill
The fact is: This statement is simplistic. The statutory pension insurance system is a pay-as-you-go system. Employees’ pension contributions are not saved up but are paid directly to current retirees.
The key question, then, is whether contributors are paying “too much.” Here’s a figure to consider: The pension contribution rate today is no higher than it was in the mid-1980s.
And: Young people,in particular , have a vested interest in ensuring that pensions continue to provide a decent standard of living in the future. This is because their work histories are more likely to have gaps than those of older people, meaning they accumulate fewer years of contributions.
The alternative to artificially low pension contributions—and thus low pensions—is private retirement savings. With all the risks and side effects that entails (see Myth 4).
Myth 4: We all have to save privately
The fact is: If the statutory pension insurance system continues to be weakened, people will be forced to fill the gaps with private retirement savings.
But funded retirement savings are risky: While they offer the potential for gains, losses are just as possible. That’s a shaky foundation for retirement. The German Pension Insurance, on the other hand, has always paid out, even through world wars and hyperinflation.
Many private retirement products are also expensive. A portion of the money paid in ends up in the pockets of insurance companies in the form of fees and commissions.
Furthermore, employers are left out of private retirement plans. With contributions to the statutory pension system, they pay half. That is likely the main reason why employers’ associations are so persistent in disparaging the statutory pension system.
Myth 5: Higher non-wage labor costs threaten jobs
The fact is: The key indicator of competitiveness is not non-wage labor costs, but unit labor costs. Unit labor costs indicate how much in wages is paid to produce a certain number of goods. They include all non-wage labor costs, including pension contributions.
Productivity is also key: If it rises—meaning more goods are produced per hour of work—labor costs may also increase accordingly without causing unit labor costs to rise.
