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Impacts of early retirement in Germany

Pension at 63 – Quo vadis?


Initiative Neue Soziale Marktwirtschaft (INSM)



Retiring at 63 is very popular. Since July 2014, people who have paid into the statutory pension insurance scheme for at least 45 years can retire at the age of 63 on a full pension. In 2021, around 30 percent of new pensioners took advantage of this opportunity. Prognos’ short study shows the consequences of retirement at 63 and investigates what would happen if this pension for the particularly long-insured persons, was abolished.

Early retirement exacerbates the shortage of skilled workers

  • In 2022, around 200,000 workers withdrew prematurely from the labour market due to taking retirement at age 63
  • A waiver of retirement at 63 in the last ten years (purely arithmetically) could have avoided about ten percent of the vacancies

Retention scenario: Consequences for pension finances

  • By 2035, contributors will have to pay an additional almost 140 billion euros to compensate for the cost of pensions at 63
  • The contribution rate to the statutory pension insurance scheme rises to 22.7 percent in 2045 from the current 18.6 percent (2022). This is shown in the reference scenario
  • At the same time, pension levels are falling
  • Pensioners as a whole will benefit if retiring at age 63 is abolished – the average pension will go up
  • Retirement at 67 without exceptions, would in addition, relieve the federal budget, as the federal government would have less to pay into the pension insurance system

Abolition scenario: Potential of pension at 67 from next year

  • Stable contribution rate of 18.6 percent by the end of the decade
  • By 2025, contributors would be relieved by around eight billion euros
  • Increase in pension levels

Our approach & methodology

First, we analysed the impact of past pension reforms on the participation of older people in the labour market. We also estimated the effect of pensions at 63 on the labour market in the period from 2014 to 2022.

In the next step, we calculated the impacts that abolishing pensions at 63 would have on the long-term financial development of statutory pension insurance and the labour market. We simulated the consequences for pension finances with our social security model, OCCUR.
We examined two scenarios: on the one hand, the immediate implementation of pension at 67 without exceptions from January 2024, and on the other, the gradual abolition of the exemptions for particularly long-term insured persons by 2031. The legal status quo is used as a reference scenario.

Further measures to close the pension gap

The pension level currently stands at 48.1 percent of last gross income and will fall significantly in the coming years. Politicians are faced with the difficult task of closing the gap, which is in light of demographic change, is becoming increasingly difficult. Other measures to reduce them include:

  • Increasing retirement age
  • Flexible retirement age
  • Increasing pension contributions
  • Promoting employment in old age (e.g., flexible working models, retraining programmes, age-appropriate working conditions – combating age discrimination and promoting age-mixed teams)
  • Promoting continuing education and lifelong learning
  • Promoting gender equality
  • Strengthening private retirement provision
  • Promotion of company pension plans
  • Inclusion of civil servants in the statutory pension insurance

Links & downloads

Study: Pension with 63 – Quo vadis? (PDF in German)

Further studies on the subject

Social contributions in focus (in German)

Pension needs over time (in German)

Reliable intergenerational contract (in German)

The future of statutory pension insurance (in German)

Inclusion of civil servants in statutory pension insurance (in German)

Effects of the statutory minimum wage on pension development (in German)

Contact person for press inquiries

Florian von Hennet
Press Officer Initiative Neue Soziale Marktwirtschaft INSM
Tel.: 030-27877 174

Contact person for content inquiries

Dr Stefan Moog (Project Manager)
Phone: +49 761 7661164-812

Project team: Dr Stefan Moog, Dr Oliver Ehrentraut, Leilah Dismond

Last update: 30.05.2023

Do you have questions?

Your contact at Prognos

Dr Stefan Moog

Senior Expert

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Dr Oliver Ehrentraut

Partner, Director, Head of Economics Division

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Leilah Dismond


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