Abolishing Germany's Early Retirement Option Could Keep 125,000 Workers on the Job, DIW Study Shows
05.06.2026 - 03:07:40 | boerse-global.de
A fresh analysis from the German Institute for Economic Research (DIW) puts a hard number on what Germany stands to gain if it scraps the deduction-free “pension at 63”: for every single birth year, the state would save around €9.5 billion. Commissioned by the Bertelsmann Foundation, the study, published on 3 June 2026, also calculates that 125,000 full-time positions would remain filled because employees would postpone their retirement by an average of ten months.
Between 250,000 and 280,000 people currently take advantage of the early-retirement option each year, which allows workers who have paid into the system for 45 years to leave the workforce before the standard age without any permanent pension reductions.
A Closer Look at the 1957 Cohort
Using the 1957 birth cohort as an example, the researchers worked out the concrete impact. Germany’s pension insurance would see a gross relief of €10.4 billion. After subtracting roughly €900 million that health and unemployment insurance would lose because of the extra months of contributions, the net gain remains substantial.
André Schleiter of the Bertelsmann Foundation told the press: “The spending on this program is high. We need to fundamentally rethink early-retirement options.”
Political Battle Escalates on Thursday
The study landed in the middle of a heated political row. Steffen Kampeter, managing director of the Confederation of German Employers’ Associations (BDA), called the pension at 63 an “expensive wrong path” and demanded its abolition to relieve social security systems and combat the skilled-labour shortage.
But within the ruling traffic-light coalition, opposition is stiff. Dagmar Schmidt, deputy chair of the SPD parliamentary group, pushed back on Thursday. She pointed to the necessity of protecting workers in physically demanding or psychologically stressful jobs. “We must not abandon those who simply cannot hold out until the regular retirement age,” she said.
Compromise Proposals Already on the Table
Rather than scrapping the scheme entirely, the DIW study and several analysts suggest middle-ground solutions: an income cap or a restriction to certain occupational groups. Such targeted measures would cushion the blow for the most burdened employees while still generating savings.
Demographic Pressure Intensifies the Debate
The discussion around the early-retirement rule, first introduced in 2014, is being fuelled by demographic trends. The legal retirement age currently sits at 66 years and four months, yet in 2024 only 40 percent of workers actually stayed on the job until that threshold.
The numbers ahead look stark: today, three contributors support every one retiree. In 15 years, that ratio is projected to shrink to two contributors per retiree. Experts warn that without reform, Germany’s pension system will barely provide more than a basic safety net.
The federal government is reportedly working on a comprehensive reform package. Whether it will incorporate the DIW’s findings is uncertain. Pension consultant Andreas Irion doubts the political feasibility, describing any such change as “difficult in the current climate.”
