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Eastern Germans Retire Earlier than Western Germans

Summary:
Eastern Germans retire earlier than western Germans. In 2017 42 percent of newly-retired individuals stopped work at the age of 63 with a full pension in eastern Germany, versus just 30 percent in western Germany. The percentage of individuals taking early retirement with a reduced pension was 27 percent in eastern Germany, compared to only 17 percent in western Germany. Only 24 percent of all newly-retired individuals worked until the current statutory retirement age of 65 years and 7 months in eastern Germany, versus 45 percent in western Germany, according to calculations by the Dresden Branch of the ifo Institute based on pension insurance statistics. “One explanation for the higher number of people retiring at 63 is the

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Eastern Germans retire earlier than western Germans. In 2017 42 percent of newly-retired individuals stopped work at the age of 63 with a full pension in eastern Germany, versus just 30 percent in western Germany. The percentage of individuals taking early retirement with a reduced pension was 27 percent in eastern Germany, compared to only 17 percent in western Germany. Only 24 percent of all newly-retired individuals worked until the current statutory retirement age of 65 years and 7 months in eastern Germany, versus 45 percent in western Germany, according to calculations by the Dresden Branch of the ifo Institute based on pension insurance statistics.

“One explanation for the higher number of people retiring at 63 is the difference in work histories: in the former GDR people usually started work young, meaning that a higher share of persons in eastern Germany qualifies for early retirement,” explains ifo researcher Joachim Ragnitz. In his view, “The fact that early retirement with a reduced pension is more prevalent in eastern Germany is also linked to the higher pension claims of women in the east. A reduced pension is more financially viable in cases where two individuals with high pensions live together in the same household. This is also due to special working histories during the GDR era, when a large number of women were encouraged to work, unlike in western Germany. This is now reflected in higher pensions for eastern German women.”

Criticising the government’s pension policy, Ragnitz adds: “The introduction of reduction-free early retirement for individuals who have paid contributions for a particularly long period of time was ultimately an election gift to the older generations. In view of the foreseeable financial difficulties with the statutory pension insurance scheme as of 2025 and growing labour shortages, it was a bad decision. This speaks in favour of critically reviewing retirement at 63 in the forthcoming negotiations over the future structure of the pension scheme.”

In 2014 the so-called retirement-at-63 scheme was introduced, which allowed individuals who had paid contributions for 45 years to retire at 63 without any reduction in their pensions. The option to retire early is also available to individuals who have paid contributions to the statutory pension insurance system for at least 35 years. In such cases, however, individuals have to accept actuarial deductions to their pension. The period that such individuals have paid pension insurance is shorter too, which reduces their monthly pension as a result.

 

Table: Pensions Drawn by Place of Residence (in percent)
 
Statutory retirement age
Retirement at 63
Retirement with reduced pension
 
2015
2016
2017
2015
2016
2017
2015
2016
2017
Schleswig-Holstein
44.1
44.3
46.8
30.2
27.7
29.1
12.8
16.5
16.9
Hamburg
49.7
50.6
53.6
22.0
19.4
21.2
13.8
17.6
18.0
Lower Saxony
42.4
42.0
45.1
30.7
28.4
30.8
15.0
19.2
17.5
Bremen
45.2
45.1
47.7
25.6
22.5
25.1
14.9
19.1
20.1
North Rhine Westphalia
44.4
43.2
45.1
28.0
26.1
28.5
13.3
17.4
16.9
Hessen
44.6
44.4
46.3
27.7
26.2
28.2
13.0
15.9
15.4
Rhineland Palatinate
43.5
42.8
44.2
30.8
29.8
31.8
14.4
17.0
17.1
Baden-Wurttemberg
38.9
40.5
42.2
32.3
30.6
32.9
14.3
16.4
16.5
Bavaria
40.7
41.5
43.2
32.4
30.6
32.6
13.5
15.9
15.7
Saarland
51.1
45.6
49.6
24.5
24.8
27.7
12.9
19.3
16.5
Berlin-West
49.3
50.3
54.8
19.5
17.4
18.3
13.0
17.9
17.8
Berlin-East
29.8
32.2
37.7
33.4
30.9
33.0
18.2
22.9
20.4
Brandenburg
20.6
22.5
26.7
42.1
37.8
40.8
23.5
28.8
25.9
Mecklenburg-Western Pomerania
18.4
20.0
23.9
40.4
36.4
40.1
24.3
30.4
27.0
Saxony
16.7
18.7
21.9
43.9
39.5
43.7
24.9
30.8
27.6
Saxony-Anhalt
16.1
17.8
22.1
42.5
37.9
42.0
28.5
35.2
31.0
Thuringia
16.9
19.3
22.5
44.7
40.6
44.1
23.8
27.8
24.9
Abroad
67.3
68.4
70.9
6.8
6.3
6.7
14.7
14.9
16.0
Total
39.5
39.7
42.1
30.9
28.7
31.2
15.9
19.5
18.6
Eastern Germany (incl. East Berlin)
18.4 
20.4
24.3
42.3
38.1
41.8
24.6
30.1
26.9
Western Germany (incl. West Berlin)
43.0
42.9
44.9
29.6
27.8
30.0
13.7
17.0
16.6
Source: Deutsche Rentenversicherung Bund; ifo Institute calculations.  
Clemens Fuest
Clemens Fuest took over from Hans Werner Sinn as chairman of the IFO Institute in April 2016. He is professor at the Faculty of Economics of the University of Munich.

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