Indexing mandatory pension systems to life expectancy is important for ensuring the
long-term affordability of public pensions for government finances as life expectancy
increases (OECD, 2011c; OECD, 2014g; Johansson et al., 2013).
The pensionable age is gradually rising from 65 to 67 years by 2029, but no further adjustment is foreseen. Without
further increases in the pensionable age, increases in life expectancy after 2029 would raise
the government deficit, increase the tax burden on labour and lower the level of pensions
relative to average income (OECD, 2013d; OECD, 2015g). Some OECD countries, including
Italy and Denmark, index the pensionable age to life expectancy (OECD, 2011b) to balance
the ratio of retirement and working years and ensure the sustainability of old-age pension
systems as life expectancy increases. In Denmark the resulting increases in pensionable
age are subject to parliamentary approval every five years.
Germany should also index the pensionable age to life expectancy.