Development of pensions for former civil servants: The increases, costs and effects

Development of pensions for former civil servants: The increases, costs and effects

According to a report by www.fr.de, spending on pensions for former public servants is steadily increasing. In January 2022, the average gross monthly salary of pensioners was 3,240 euros, an increase compared to the 3,170 euros of the previous year. In addition, around 378,600 survivors received pension benefits, which corresponds to an increase of 0.3 percent.

Total spending on pensions for former public servants amounted to 53.4 billion euros in 2022. Together with the survivors' pension costs of 8.4 billion euros, this amounted to around 1.6 percent of the gross domestic product (GDP). In 2021, spending amounted to 52.5 billion euros and together with survivors' benefits of 8.3 billion euros, they accounted for 1.7 percent of GDP.

With 461,600 people and a share of 33.1 percent of all pensioners, teachers working in the state sector formed, as in previous years, the largest group of retirees in Germany. Former civil servants from the Deutsche Bundesbahn and the post office made up the second largest group with 284,100 people and a share of 20.4 percent.

The number of pensioners rose sharply between 2000 and 2020 (+53.9 percent). This increase was mainly due to the large number of teachers hired in the 1960s and 1970s. In the state area, the number of retirees has almost tripled in these 20 years (+181.1 percent).

Of the total of 59,000 new retirees in 2022, 46,500 or 79 percent retired with an average age of 63 years and 9 months after reaching retirement age. However, only 11,700 reached the statutory retirement age (20 percent of all newly retired people).

The remaining 34,800 (59 percent of all newly retired people) retired early or reached a special age limit, such as that which applies to prison service or to professional soldiers. Another 10,300 people, or 17 percent of all those newly retired in 2022, were forced into retirement due to incapacity to work. They were on average 56 years and 9 months old when they retired.

The sharp increase in pensioners and the high number of retirements in the state and municipal sectors indicate that pension costs will continue to rise. In particular, the increasing number of early retirements poses a challenge for financing pensions.

The impact on the market and the financial sector could therefore be an increase in pressure on public budgets to finance pensions. This could result in future fiscal decisions and budgets being placed under greater strain to cover rising pension costs. Furthermore, this could have an impact on long-term economic stability, particularly if demographic developments lead to further exacerbation of financing problems.