During the election campaign, all parties ruled out raising the retirement age.

Instead, the coalition wants to examine the friendly-sounding “flexible retirement based on the Scandinavian model”.

In addition to the freedom gained, greater flexibility – according to the political desire – will help keep people in their jobs longer.

The possibility of targeted reductions in working hours should enable employees to be physically and mentally able to pursue their profession for longer.

In this case, drawing a proportionate pension can compensate for the loss of earned income.

Even after reaching the standard retirement age, it should become easier to be employed.

At first glance, the concept is convincing.

However, the idea has two weaknesses.

Freedom of choice does not necessarily lead to higher employment and longer working hours – rather the opposite is to be expected.

So far, there is no reliable evidence that people work longer because of more flexibility.

Existing options such as the “flexible pension” are practically not used.

And semi-retirement, which is used somewhat more frequently, is primarily used to encourage people to completely withdraw from working life earlier and to reduce the number of employees in companies.

Double-edged sword

Studies tend to suggest that a flexible retirement age before the normal retirement age reduces employment.

Recent empirical research points to an important mechanism: not only financial incentives play a role.

People react particularly strongly to fixed age limits.

They act as norms for people and companies to orientate themselves when leaving work.

Many employees retire at the earliest possible age, even if continued employment would be financially attractive.

This speaks against lowering the earliest possible retirement age.

If you were to make existing opportunities for additional income more generous, there could be two opposing effects.

Earlier retirement would become more attractive, which would reduce employment.

At the same time, the incentive to work while drawing a pension would increase.

However, experience with the flexible pension means that little demand for such arrangements can be expected.

Socio-political challenges due to demographic change

Flexible retirement is also problematic from a socio-political perspective.

What pension deductions should there be for earlier retirement?

The actuarial calculation of “correct” deductions harbors a great deal of potential for dispute.

The current deductions are often criticized as too low, also with reference to the Scandinavian countries, which apply higher deductions for earlier retirement.

Higher deductions would result in lower pension entitlements for early retirement and increase inequality in retirement income.

Flexible retirement is therefore a double-edged sword.

On the one hand, it could help people with health restrictions to reduce work during the working phase without losing too much income.

On the other hand, reduced employment or earlier retirement lead to lower pensions.

Because not everyone makes optimal financial decisions, more flexibility can lead to inadequate pensions.

In order to prevent transfer dependency through early retirement, it is proposed that people with pension entitlements below the basic security level be excluded from flexible retirement.

However, this would prevent flexible retirement for the group that is dependent on special support.

In view of the challenges posed by demographic change for the labor market and social policy, other aspects of the pension system are more important than the introduction of flexible retirement: With the introduction of retirement at 67, politicians have sent a clear signal, not for the earliest retirement age, but for the normal one retirement age.

After this age, the opportunities to continue working should be improved - flexibly and with financial incentives.

However, it must be clear to politicians that a significant long-term effect on employment can only be expected from a further increase in the standard retirement age.

At the same time, there must be exceptions for people who do not manage to work up to the standard retirement age.

In terms of social policy, an adequate disability pension is necessary, and only with this security can the increase in the retirement age be implemented.

The current regulation, according to which long-term insured persons can retire with deductions from the age of 63, also aims in this direction.

Although this possibility leads to a decline in employment, it can also be justified in terms of social policy.

Johannes Geyer is deputy head of the State Department at DIW Berlin.

Peter Haan is Professor of Empirical Economic Research at the Free University of Berlin and Head of the State Department at DIW Berlin.

Arthur Seibold is junior professor in the Department of Economics at the University of Mannheim.