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The Notional Defined Contribution Pension Scheme and the German ‘Point System’: A Comparison

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  • Vera Gurtovaya
  • Sergio Nisticò

Abstract

This paper examines the analytical properties of the German ‘points‐based’ pension system. These properties are compared with those of a canonical Notional Defined Contribution (NDC) pension scheme. The paper identifies the circumstances under which the German ‘points‐based’ system would mimic a Swedish‐type NDC scheme and verifies to what extent the German ‘points‐based’ scheme ensures uniformity of individual rates of return for some hypothetical careers. Finally, the paper proposes a set of new possible adjustment rules able to increase similarity between the German point system and the NDC scheme.

Suggested Citation

  • Vera Gurtovaya & Sergio Nisticò, 2018. "The Notional Defined Contribution Pension Scheme and the German ‘Point System’: A Comparison," German Economic Review, Verein für Socialpolitik, vol. 19(4), pages 365-382, November.
    • Handle: RePEc:bla:germec:v:19:y:2018:i:4:p:365-382
    DOI: 10.1111/geer.12127
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    1. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    2. Robert Holzmann & Edward Palmer, 2006. "Pension Reform : Issues and Prospects for Non-Financial Defined Contribution Schemes," World Bank Publications - Books, The World Bank Group, number 6983, December.
    3. Axel H. Börsch-Supan & Christina B. Wilke, 2003. "The German Public Pension System: How it Was, How it Will Be," Working Papers wp041, University of Michigan, Michigan Retirement Research Center.
    4. Salvador Valdes‐Prieto, 2000. "The Financial Stability of Notional Account Pensions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 395-417, September.
    5. Sandro Gronchi & Sergio Nisticò, 2008. "Theoretical Foundations Of Pay‐As‐You‐Go Defined‐Contribution Pension Schemes," Metroeconomica, Wiley Blackwell, vol. 59(2), pages 131-159, May.
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