(de-news.net) – Minister-President of Rhineland-Palatinate Gordon Schnieder (SPD) is advocating for a more thorough evaluation of the expenses and remaining recipients of Germany’s “retirement at 63” policy prior to its elimination. With SPD and CDU lawmakers at odds over pension reform and internal criticism, the issue has heightened tensions within the governing coalition. Conversely, economist Peter Bofinger contends that keeping the clause would be costly—between 5 and 10 billion euros per year.
Schnieder is urging Chancellor Friedrich Merz’s coalition government to establish the actual financial cost of retaining the so-called “retirement at 63” provision before moving to abolish it. Schnieder said he was not fundamentally opposed to ending penalty-free early retirement, but maintained that important details still required discussion. In particular, he argued that the government should determine how many workers today still have employment histories that began unusually early and consequently allow them to qualify for a full pension after 45 years of contributions.
The question, as Schnieder framed it, is closely tied to how much the provision still applies to the kinds of career paths for which it was originally relevant. He noted that relatively few people now enter the workforce at 14 or 15 and accumulate 45 years of contributions substantially before reaching the statutory retirement age. Such employment histories have therefore become increasingly uncommon. Schnieder said the number of people benefiting from the provision would inevitably decline over the coming years as those earlier career patterns gradually disappear.
At the same time, Schnieder emphasized that workers affected by any change should be given a clear indication that their circumstances are recognized and that the issue remains open to further discussion. For him, the political question is therefore not simply whether the provision should ultimately be abolished, but also how its remaining beneficiaries should be treated during the transition. He also called for coalition disagreements to be handled internally rather than aired publicly, arguing that political differences could be addressed without turning them into open disputes.
Lawmakers debated planned spending on labor and social affairs during the Bundestag’s budget week, placing pension policy within a broader discussion over government spending. Opposition lawmakers criticized proposed cuts, while Labor Minister Bärbel Bas (SPD) reiterated that the government intended to proceed with its pension reform and indicated that transitional arrangements would be part of the process. Bas said those affected by the proposed elimination of penalty-free retirement after 45 years of contributions would receive protection based on legitimate expectations.
At the same time, Bas maintained that the statutory pension system needed to be restructured. In her assessment, abandoning the planned changes would carry substantial financial consequences, including higher costs, pension reductions and significantly increased contribution rates. CDU lawmaker Johannes Winkel, meanwhile, praised the reform plans for addressing the interests of younger generations more directly, highlighting the generational dimension that has become central to the pension debate.
Economist warns of billions in costs
The dispute has also exposed growing tensions within the governing coalition. Suggestions from members of the CDU parliamentary ranks that Bas should be dismissed were sharply rejected by SPD Secretary-General Tim Klätendorf, who characterized the criticism as an ineffective diversion from the country’s pressing challenges. He argued that the Union should focus on resolving dissatisfaction and internal disputes within its own ranks rather than directing those conflicts toward its coalition partner.
The criticism surfaced as the coalition faced political pressure ahead of state elections. SPD parliamentary manager Dirk Wiese also urged restraint, arguing that the governing parties would be better served by continuing to advance shared objectives despite their disagreements. In his view, personal accusations would not help the coalition make progress. The emphasis, he said, should remain on moving forward together rather than allowing internal tensions to dominate the public debate.
Sebastian Roloff, the SPD’s spokesman for economic policy, took an even more pointed view of the dispute. He argued that criticism of the coalition’s budget by the head of the largest Union parliamentary group amounted, in substance, to a vote of no confidence in Merz, despite repeated assurances to the contrary. Roloff said the CDU should resolve the conflict within its own ranks before it could further damage the coalition’s ability to govern or undermine confidence in Germany’s economic situation.
Separately, Peter Bofinger, a former economic adviser, warned the SPD against abandoning plans to eliminate the “retirement at 63” provision. From an economic perspective, he argued, maintaining the clause was difficult to justify while also imposing substantial costs. He rejected the argument that abolishing the provision would punish workers who had demonstrated a strong commitment to employment.
Instead, Bofinger pointed to the existing pension system’s treatment of longer contribution periods as evidence that additional years of work are already rewarded. Under that system, Bofinger noted, a person who contributes for 45 years receives about 12.5 percent more in pension benefits than someone who contributes for 40 years. On that basis, he argued, the special early-retirement provision represents an additional benefit rather than the primary mechanism through which longer working lives are recognized. Its abolition, he maintained, would therefore not eliminate the pension system’s existing reward for longer contribution histories.
Bofinger further argued that retaining the early-retirement provision would distribute its financial burden across employers, contributors and other pensioners. The annual cost is estimated at between 5 billion euros and 10 billion euros, with the higher figure equivalent to roughly half a percentage point in pension contributions. The scale of those figures, he argued, illustrates why the provision remains a significant element of the broader debate over the sustainability and financing of Germany’s pension system. Bofinger is a senior professor of economics at the University of Würzburg. After being nominated by the SPD, he served on the federal government’s pension commission. From 2004 to 2019, he was a member of the German Council of Economic Experts, commonly known as the “Five Wise Men,” giving him a long-standing role in Germany’s economic policy discussions.
