Three reasons for this – New burdens for our pension system

One thing doesn’t come as a surprise: the number of new retirees has been rising faster lately as the baby boom generation is moving towards retirement (see chart below). More than 140,000 new awards were added in the past two years, more growth than ever before.

Fewer early retirees, but more unemployed in old age
Restrictive measures have reduced early retirement from the previous 30,000 to just 13,000, but unemployment has risen in old age. Among the 55 to 59-year-olds, the unemployment rate for women and men is ten percent and for men over 60 even 15 percent. Only 50 percent of women who reach retirement age make the transition from work to retirement.

Older people (back) on the labor market
“There is a large reserve for the labor market,” says Christine Mayrhuber of the economic research institute Wifo. If it were possible to integrate more older people into the labor market, we would receive a “triple dividend”, according to Mayrhuber. First, unemployment insurance would be financially relieved. Secondly, everyone who has a job pays more premiums, which means that the pension insurance has higher income. Thirdly, the premium times for the insured will increase and they will receive a higher pension later on.

But despite hundreds of thousands of job openings and a shortage of skilled workers, many older people are unable to find work. Mayrhuber believes that companies should also reconsider. “The all-or-nothing principle applies to us. 100 percent is always required. But at a certain age you can only get 70 to 80 percent. You have to be prepared for that,” says the expert. This would be supported by programs such as “fit-to-work” and should be expanded. More than 70,000 people over 55 are currently unemployed.

Pension increase should be 5.2 percent
In 2021, 52 billion euros was spent on pensions. About 40% of this comes from the budget because the state has to make a contribution or pays civil servants’ pensions in full. Next year, that will probably rise to three billion euros. After all, retirees should at least be compensated for inflation.

According to Mayrhuber, a one percent pension increase will cost about 520 million euros. The average inflation rate from July 2021 to June 2022 would be 5.2 percent. This is the legal minimum requirement. But experience shows that in the political negotiations that start after the summer, something is always added. Retirees do, however, already benefit from other government measures, such as an increase in the tax credit.