Germans told to work longer

Workers will be asked to retire later on a lower pension

A special commission of experts set up by the German Government has proposed radical measures to ease the burden on the country's pension system.

It proposes raising the retirement age to 67, freezing current pension payouts until 2005, and encouraging more private pension cover.

Without reform, the commission says, the pension system will collapse under the pressure of a lower birth rate, longer expectancy, and sluggish economic growth.

BBC Berlin correspondent Ray Furlong says the message has been generally accepted here, but the various proposals put forward to deal with it have not.

We were not actually trying to write any bible, only a handbook for social reform Bert Ruerup Commission head

In effect, it means tomorrow's pensioners will be worse off than today's, he says.

Many of the report's recommendations have leaked out over the eight months of its preparation, giving rise to a barrage of criticism.

The government has promised to introduce its own pension reform in the autumn.

Health Minister Ulla Schmidt said the report contained many "correct and reasonable" suggestions but stopped short of backing the move to raise the retirement age.

She said only that she agreed early retirement had to be stopped.

One month more per year

The average German retires before the age of 63 - but by 2050 one in three people in Germany is expected to be 60 or older.

RUERUP RECOMMENDATIONS Increase in retirement age More private pension cover Temporary freeze on pension payouts More benefits for those who retire later Increased contributions Lower benefits

The commission, headed by economist Bert Ruerup, recommends discouraging early retirement by slowing the rate at which benefits rise over an employee's working life.

It suggests phasing in the increased retirement age between 2011 and 2035, at a rate of one month per year.

Pensions will consume almost a third of the German budget for 2003.

Plans for pension reform are part of the German Government's Agenda 2010 programme, which is aimed at freeing labour markets, cutting taxes, and shaking up welfare, in order to create jobs and slash the budget deficit.

Rising contribution rates

Speaking before the report was presented, Gerhard Schroeder said it was no Bible.

But Mr Ruerup said in response: "We were not actually trying to write any bible, only a handbook for social reform."

He said the commission's reforms would allow contribution rates to be held to 22% of an employee's salary by 2030 - a slight increase on the current 19.5%.

Meanwhile gross benefit levels would fall to some 40% of the employee's salary, instead of 48% at present, he said.

The report also suggests a "sustainability factor" which would freeze pension payouts if the ratio of pensioners to people in work were to rise further.