Germany’s pension system should gradually raise the retirement age to 73 by 2060, according to a report by the Economics Ministry’s new scientific advisory board.
The panel of economists warns that without significant reform, the system will become unsustainable as productivity stagnates and the population continues to age.
The report, presented on Monday and cited by Bild, concludes that demographic realities and low economic growth leave no alternative but to extend working lives. It was prepared by economists Justus Haucap of the University of Düsseldorf, Stefan Kolev of the Ludwig Erhard Forum, Volker Wieland of the Institute for Monetary and Financial Stability in Frankfurt, and Veronica Grimm of Nuremberg University of Technology. All four are known for advocating free-market solutions and limited government intervention.
“The time for reforms is becoming increasingly urgent,” the authors wrote. “Economic output has been stagnating for years, while comparable economies are growing significantly more dynamically.” The report attributes this to weak productivity growth and demographic decline, arguing that Germany must adjust its retirement policies to reflect rising life expectancy.
“We will have to work more if we want to maintain the scope of social security without leaving even greater burdens for future generations,” the economists warned. “The retirement age must be linked to life expectancy.”
The advisory board cites Denmark as a model for its proposal. Since 2006, Denmark has tied its pension age directly to average life expectancy. The statutory retirement age there has gradually increased from 65 in 2006 to 67 today, and it is set to rise to 70 by 2040 under a reform approved by parliament in May 2025. The legislation applies to all Danish citizens born after Dec. 31, 1970, and ensures automatic adjustments every five years based on demographic forecasts.
Despite having a more favorable demographic profile than Germany, Denmark’s approach means that future generations are expected to retire later as they live longer. If current trends continue, Danes born after 1997 could face a retirement age of 73 by 2060, with average life expectancy projected to reach nearly 90.
Germany’s current plan is far less flexible. The statutory retirement age is set to rise to 67 by 2031, but any further increases would require explicit political approval. Unlike Denmark, Germany has no automatic mechanism linking pensions to life expectancy, meaning each adjustment must pass through the political process — a debate that regularly provokes strong opposition from trade unions and social groups.
Another important factor in the pension system, however, is government expenditure. A prominent issue for Europe’s largest economy currently is the fact that fewer people are paying into the coffers through income tax; meanwhile, its welfare budget has ballooned to unprecedented levels, and mass immigration is playing a critical role in this imbalance.
In November last year, Federal Employment Agency (BA) statistics showed that of the 4 million people who can work but receive social benefits in Germany, more than 2.5 million have a migration background, constituting 63.5 percent of all recipients.
Similarly, in June, Bild reported how nearly half of Germany’s €17.68 billion in housing support for 2024 was paid out to foreigners, citing government data. The money, distributed under the citizen’s benefit system, was used to cover rent, heating, operating costs, and deposits for low-income residents. Of the total, €8.15 billion went to people without German citizenship, even though they make up just around 15 percent of the population.
BA data published in April showed how the citizen’s benefit reached a record total high of €46.7 billion in 2024, a massive 10 percent increase versus 2023.
Germany’s ruling CDU/CSU bloc is now seeking to limit welfare entitlement for foreign nationals, particularly those arriving from Afghanistan and Syria, who typically remain on handouts for longer than other migrants.
“We cannot accept that hundreds of thousands of young asylum seekers here in Germany are unemployed for decades,” said CDU deputy parliamentary group leader Mathias Middelberg in August.
A rising welfare budget is just one of the factors in the spiraling crisis, however. Typical of much of Western Europe, Germans are having fewer babies, leading to an ageing workforce. Without addressing this fundamental issue, politicians may feel that raising the retirement age is inevitable, no matter how unpalatable for the electorate.
